By Seun Ibiyemi
The Monetary Policy Committee (MPC) of the Central Bank of Nigeria (CBN) on Tuesday retained the Monetary Policy Rate (MPR), the country’s benchmark interest rate, at 26.5 per cent for the second consecutive meeting, citing renewed geopolitical tensions in the Middle East and lingering inflationary pressures.
The decision was announced by the Governor of the CBN, Olayemi Cardoso, at the end of the apex bank’s 306th MPC meeting in Abuja, attended by all 11 committee members.
Besides retaining the benchmark lending rate, the committee also maintained the asymmetric corridor around the MPR, the Cash Reserve Ratio (CRR) at 45 per cent for Deposit Money Banks and 16 per cent for Merchant Banks, while retaining the liquidity ratio and the CRR for non-Treasury Single Account public sector deposits at 75 per cent.
The latest decision follows the committee’s earlier decision to pause monetary tightening after implementing a 50-basis-point rate cut in February 2026.
Cardoso said the MPC opted to maintain its current policy stance after weighing the risks posed by rising geopolitical uncertainties against the modest easing in domestic inflation.
“The committee’s decision to maintain the current policy stance followed a thorough assessment of the balance of risks.
Although headline inflation moderated marginally in June 2026, global uncertainties have heightened due mainly to the renewed hostilities in the Middle East,” he said.
Nigeria’s headline inflation rate eased slightly to 15.91 per cent in June from 15.93 per cent in May, according to the National Bureau of Statistics, marking the first decline after three consecutive monthly increases.
Inflation had climbed steadily from 15.06 per cent in February to 15.38 per cent in March, 15.69 per cent in April and 15.93 per cent in May.
Cardoso noted that the committee was particularly concerned about the impact of renewed tensions in the Middle East on global energy prices and the potential spillover effects on domestic inflation.
He, however, expressed confidence in the resilience of the Nigerian economy, attributing its ability to withstand external shocks to reforms implemented by both fiscal and monetary authorities.
“Available evidence suggests that the Nigerian economy has remained largely resilient to the external shocks, reflecting the gains from prior reforms implemented by the fiscal and monetary authorities,” he said.
The CBN governor added that maintaining the current monetary stance would allow policymakers to monitor incoming economic data and assess inflationary trends before taking further action.
On price developments, Cardoso explained that while headline inflation moderated in June, food inflation accelerated to 17.52 per cent from 16.96 per cent in May due to supply constraints in key food-producing areas and higher transportation costs.
Core inflation, however, slowed to 15.92 per cent from 16.82 per cent, largely supported by exchange-rate stability.
He added that the 12-month average inflation rate fell for the sixth consecutive month to 17.63 per cent in June from 18.36 per cent in May, while month-on-month headline inflation eased to 1.66 per cent from 1.75 per cent.
The MPC also commended the Federal Government’s implementation of Executive Order 9, describing it as capable of strengthening Nigeria’s macroeconomic fundamentals, while urging authorities to sustain efforts to boost crude oil production and accelerate reforms in the solid minerals sector.
The committee further praised the banking sector recapitalisation exercise, noting that it had strengthened the resilience of the financial system and improved key prudential indicators.
Cardoso disclosed that 33 out of Nigeria’s 37 banks had already met the new recapitalisation requirements without any extension of the deadline, while the remaining institutions were pursuing regulatory options under the supervision of the apex bank.
He also defended the recent moderation in bank lending, describing it as a temporary consequence of the withdrawal of COVID-19 regulatory forbearance and ongoing adjustments to banks’ loan portfolios.
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On the foreign exchange market, Cardoso said the CBN would continue to support a transparent, market-driven exchange-rate system rather than target a specific value for the naira.
Responding to the International Monetary Fund’s assessment that the naira remains undervalued, he said the currency’s long-term strength would depend on improved economic fundamentals, including higher oil exports, increased foreign direct investment and stronger domestic productivity.
“At the present level, the country does need a competitive currency,” he said.
The governor revealed that Nigeria’s gross external reserves rose to $50.47 billion at the end of May, driven mainly by crude oil-related tax receipts and third-party inflows, enough to finance approximately 11 months of imports, significantly above the international benchmark of three months.
He also disclosed that the economy grew by 3.89 per cent in the first quarter of 2026, supported largely by non-oil sector activities, while the Composite Purchasing Managers’ Index improved to 50.1 points in June from 49.6 points in May, indicating renewed expansion in business activity.
Looking ahead, Cardoso said inflation was expected to moderate further over the medium term, supported by exchange-rate stability, the delayed impact of earlier monetary tightening measures and improved food supply during the harvest season.
However, he warned that a prolonged escalation of the Middle East conflict remains the biggest threat to the outlook.
“The key risk to the outlook remains the severe and prolonged escalation of the Middle East conflict,” he said.
The MPC’s next meeting is scheduled to hold on September 21 and 22, 2026.
