The Monetary Policy Committee (MPC) of the Central Bank of Nigeria (CBN) on Tuesday retained the Monetary Policy Rate (MPR) at 26.5 per cent, choosing to keep monetary policy tight as rising geopolitical tensions in the Middle East continue to threaten inflation and global economic stability.
The decision was taken at the committee’s 306th meeting held on July 20 and 21, 2026, with 11 members in attendance, the CBN Governor, Olayemi Cardoso, said at the press briefing on Tuesday.
He said in addition to retaining the benchmark interest rate, the committee left the standing facilities corridor unchanged at +500 and -100 basis points around the MPR.
The committee also retained the Cash Reserve Ratio (CRR) at 40.5 per cent for deposit money banks, 16 per cent for merchant banks and 70.5 per cent for non-TSA public sector deposits.
Explaining the decision, Cardoso said the committee maintained the current policy stance after “a thorough assessment of the balance of risks.”
Although headline inflation moderated slightly in June, he said renewed hostilities in the Middle East had increased global uncertainty and could trigger higher energy prices with possible pass-through effects on domestic inflation.
“In view of the evolving developments, maintaining a cautious monetary policy stance remains appropriate,” Cardoso said.
He noted that while the conflict posed upside risks to inflation, Nigeria had remained largely resilient to external shocks due to earlier fiscal and monetary reforms.
He stressed that holding rates steady would allow policymakers to monitor incoming data and better assess the inflation outlook before making further policy adjustments.
Cardoso also acknowledged the Federal Government’s renewed commitment to stronger policy coordination with the CBN, saying the collaboration had helped reduce the impact of the Middle East crisis on the domestic economy.
He said greater alignment between fiscal and monetary policies would improve policy effectiveness and support the country’s broader macroeconomic objectives.
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The CBN governor further highlighted the potential benefits of Executive Order Nine and commended government efforts to improve crude oil production.
He urged relevant agencies to strengthen reforms that would unlock opportunities in sectors such as solid minerals to boost government revenue.
On prices, Cardoso noted that headline inflation eased marginally to 15.91 per cent in June 2026 from 15.93 per cent in May, ending three consecutive months of increases.
He said the moderation was driven by lower non-food inflation, which offset higher food prices, noting that food inflation rose to 17.52 per cent in June from 16.96 per cent in May due to supply constraints in major food-producing areas and rising transportation costs.
Core inflation, however, slowed to 15.92 per cent from 16.82 per cent, largely reflecting exchange rate stability.
Cardoso also observed that the 12-month average inflation rate declined 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 fell to 1.66 per cent from 1.75 per cent.
Economic growth remained resilient despite a slight slowdown, with real GDP expanding by 3.89 per cent in the first quarter of 2026, compared with 4.07 per cent in the previous quarter.
According to Cardoso, growth was supported by the non-oil sector, which expanded by 3.94 per cent on the back of improved performance in telecommunications, financial services, trade, transportation and other services.
Oil sector growth slowed to 2.57 per cent from 6.79 per cent in the fourth quarter of 2025 due to maintenance work on oil facilities and installations.
He, however, pointed to improving business activity, noting that the Composite Purchasing Managers’ Index (PMI) rose to 50.1 points in June from 49.6 points in May, indicating a return to expansion.
Banking Sector, Reserves and Outlook
The CBN governor welcomed the successful completion of the banking sector recapitalisation exercise, saying it had strengthened the resilience of the financial system as reflected in key prudential and financial soundness indicators.
He nevertheless said the CBN would sustain effective supervision to preserve financial system stability and mitigate emerging risks.
He also noted that Nigeria’s gross external reserves increased to $52.52 billion as of July 17, 2026, from $50.47 billion at the end of May, driven mainly by receipts from crude oil-related taxes and third-party inflows.
He said the reserve level was sufficient to finance about 11 months of imports of goods and services, well above the international benchmark of three months.
Cardoso said global growth is expected to slow to 3.0 per cent in 2026 from 3.5 per cent in 2025 due to geopolitical tensions, trade policy uncertainty and tight fiscal conditions.
He warned that global inflation risks remain elevated because of rising crude oil and commodity prices, supply chain disruptions, climate-related shocks, exchange rate volatility and fiscal constraints in emerging economies.
For Nigeria, the MPC projected that economic growth would remain resilient, supported by improved crude oil production, expansionary PMI readings and the positive impact of recent policy reforms.
It also expects inflation to moderate further over the medium term, driven by continued exchange rate stability, the lagged effects of previous monetary tightening and improved food supply as the harvest season approaches.
Cardoso, however, said the committee cautioned that a prolonged escalation of the Middle East conflict remains the biggest threat to the outlook.
He reaffirmed the apex bank commitment to maintaining price and financial system stability and said it stands ready to take further policy measures as macroeconomic conditions evolve.
Alex is a business journalist cum data enthusiast with the Pinnacle Daily. He can be reached via ealex@thepinnacleng.com, @ehime_alex on X