Moderate inflation, fx stability, others behind CBN’s interest rate retention

The moderate increase in inflation, forex stability and other macroeconomic factors are the key factors behind the recent retention of Monetary Policy Rates by the Central Bank of Nigeria, checks by Daily Trust have shown. Daily Trust reports that the Monetary Policy Committee (MPC) of the Central Bank of Nigeria (CBN) held its 305th meeting […]

The moderate increase in inflation, forex stability and other macroeconomic factors are the key factors behind the recent retention of Monetary Policy Rates by the Central Bank of Nigeria, checks by Daily Trust have shown.

Daily Trust reports that the Monetary Policy Committee (MPC) of the Central Bank of Nigeria (CBN) held its 305th meeting on May 19 and 20, 2026 where it reviewed recent developments in the global and domestic economies and assessed the near-to-medium-term outlook.

Addressing Journalists at the end of the meeting on Wednesday, the CBN governor, Olayemi Cardoso announced that 11 members of the Committee who were present at the meeting voted to keep rates constant.

The decision is coming amidst experts’ prediction that the Bank will retain rates due to geopolitical tension in the Middle East and rising inflation.

On April 15, the National Bureau of Statistics (NBS) said Nigeria’s headline inflation rate has increased to 15.38 percent in March 2026, up from the 15.06 percent in February.

 

Real reasons behind rates retention

Further analysis of the Communique by this paper showed that the MPC based its decision on some economic realities in the country.

He stated: “Although inflation has risen marginally for two consecutive months, largely induced by external shocks, the MPC recognised its transitory nature and remain confident that the current macroeconomic environment is sufficiently robust to support a return to disinflation.

“In reaching its decisions, the MPC particularly noted the spillovers from the Middle East crises, which have exerted upward pressure on energy prices, cost of transportation, and other logistics.

“However, available evidence indicates that the impact of the crisis on the Nigerian economy has been largely muted due to the benefits of prior policy reforms.

“These include: exchange rate stability; improvements in external reserve buffers; strengthened monetary policy transmission; well-capitalized banking system; ongoing fiscal consolidation- which have significantly bolstered the economy’s ability to absorb external shocks.

“As a result, the pass-through of global commodity and energy price shocks to domestic inflation has been significantly mitigated and would have been more pronounced in the absence of these reforms.

“The MPC was, therefore, convinced that the essential conditions for price stability remain firmly in place,” the Communique said.

 

GDP, non-oil exports other contributing factors to rates retention

Further analysis of the Communique document show that improvements in non-oil exports, GDP growth and other factors also influenced MPC’s decision

“Headline inflation (year-on-year) rose marginally for the second consecutive month to 15.69 per cent in April 2026, from 15.38 per cent in the preceding month, largely driven by an increase in the food component. Food inflation rose to 16.06 per cent in April 2026 from 14.31 per cent in March, reflecting the high cost of transportation and other logistics, as well as seasonal factors. 

“Core inflation, however, moderated to 15.86 per cent in April 2026, from 16.21 per cent in March. Similarly, the 12-month average inflation slowed to 19.16 per cent in April 2026, from 20.05 per cent in March, marking the sixth month of consecutive decline.  Month‑on‑month, headline inflation also eased to 2.13 per cent in April 2026, compared with 4.18 per cent in March 2026, reflecting moderation in both food and core components. 

“Real GDP grew by 4.07 per cent in the fourth quarter of 2025, compared with 3.98 per cent in the preceding quarter, supported by expansion in industry and agriculture sectors. The non-oil sector grew by 3.99 per cent (year-on-year) in Q4 2025 from 3.91 per cent in the preceding quarter, driven by key activities in the Services sector including information & communication, and transportation & storage activities.

“Growth in the oil sector also increased to 6.79 per cent in Q4 2025 from 5.84 per cent in the previous quarter, on the back of improved refining in the downstream sector.,” the report stated

 

Reserves hit $50b

Cardoso disclosed that the nation’s Foreign Reserves stood at $49.49 billion, nearing the pre- Middle East crisis period level. 

He expressed optimism that the reserves with the capacity to accommodate nine months of import would bolster investor confidence in the Nigerian economy, which he described as having a positive outlook expected to remain resilient.

“Gross external reserves remained robust at US$49.49 billion as of 15th May 2026 compared with US$48.35 billion at end‑March 2026, sufficient to cover 9.04 months of imports for goods and services. This strong buffer continues to reinforce investor confidence in the Nigerian economy and support exchange rate stability,” he further explained

 

No FX market intervention

Fielding questions on whether CBN has resumed intervention in the fx market, Cardoso said no CBN intervention in the Foreign Exchange (FX) market as he maintained that market was already deep enough to operate on its own.

He explained, “What we have done is to meet the needs of loans repayment or needs of various government agencies. As we do this, funds also flow in.”

Meanwhile, at the currency market, the Naira recorded a marginal gain of N0.5 on Wednesday and stood at N1,373.34 after days of depreciation in the official market. 

The Communique concluded by noting that “In the light of evolving domestic and global uncertainties, the MPC reaffirm its commitment to a forward-looking and evidence-based policy framework, anchored on its primary mandate of achieving price stability, while preserving the soundness and resilience of the financial system,”

 

Cautious move, access to credit crucial – Expert

Reacting to the development, a development Economist, Dr. Maxwell Chime told Daily Trust that the CBN’s decision to hold rates is a cautious move amid global uncertainties.

“The decision of the CBN to retain the interest rate at 26.50% is a very cautious decision given the present global economic tension in the middle east. However, access to credit for businesses must be a priority for the apex Bank,” he said.