CBN Retains Interest Rate at 26.5% as Inflation Eases, External Reserves Rise

Oru Leonard 

The Monetary Policy Committee (MPC) of the Central Bank of Nigeria (CBN) has retained the Monetary Policy Rate (MPR) at 26.5 per cent, maintaining its cautious monetary policy stance amid easing inflation and growing global economic uncertainties.

The decision was announced at the end of the 306th MPC meeting, held on July 20 and 21, 2026, with all 11 members of the Committee in attendance.

The Committee also retained the Standing Facilities Corridor at +50/-450 basis points around the MPR, while leaving the Cash Reserve Requirement (CRR) unchanged at 45 per cent for Deposit Money Banks, 16 per cent for Merchant Banks, and 75 per cent for non-Treasury Single Account (non-TSA) public sector deposits.

According to the MPC, the decision followed a comprehensive assessment of domestic and global economic conditions. Although headline inflation moderated slightly to 15.91 per cent in June 2026 from 15.93 per cent in May, the Committee noted that renewed hostilities in the Middle East have heightened global uncertainties, with the potential to trigger higher energy prices and renewed inflationary pressures.

The Committee observed that Nigeria’s economy has remained resilient to external shocks due to reforms implemented by both the fiscal and monetary authorities. It added that retaining the current policy stance would allow the Bank to monitor inflation trends and other macroeconomic indicators before taking further action.

The MPC welcomed the Federal Government’s renewed commitment to closer fiscal and monetary policy coordination, describing it as essential for improving policy effectiveness and achieving broader macroeconomic objectives.

Members also highlighted the benefits of Executive Order 9, while commending government efforts to increase crude oil production and urging relevant agencies to accelerate reforms in the solid minerals sector to diversify national revenue sources.

On the financial sector, the Committee applauded the successful banking sector recapitalisation exercise, noting that it has strengthened the resilience of Nigerian banks. However, it advised the CBN to sustain robust regulatory oversight to preserve financial system stability.

The Committee noted that food inflation increased to 17.52 per cent in June from 16.96 per cent in May due to supply constraints, while core inflation declined to 15.92 per cent from 16.82 per cent, largely driven by exchange rate stability. The 12-month average inflation rate also fell to 17.63 per cent, marking the sixth consecutive month of moderation.

On economic performance, Nigeria’s Gross Domestic Product (GDP) expanded by 3.89 per cent in the first quarter of 2026, supported by strong growth in the non-oil sector, particularly telecommunications, financial services, trade, transportation and other services.

Although oil sector growth slowed due to maintenance activities, the Committee noted improving business confidence, with the Purchasing Managers’ Index (PMI) rising to 50.1 points in June, indicating renewed expansion.

The MPC further disclosed that Nigeria’s gross external reserves increased to US$52.52 billion as of July 17, 2026, up from US$50.47 billion at the end of May, boosted by crude oil-related tax receipts and third-party inflows. The reserves are sufficient to finance about 11 months of imports, well above the international benchmark of three months.

On the global outlook, the Committee projected that world economic growth would slow to 3.0 per cent in 2026 from 3.5 per cent in 2025, citing geopolitical tensions, trade uncertainties and tighter fiscal conditions. It warned that higher crude oil prices, supply chain disruptions, climate-related shocks and exchange rate volatility could continue to fuel inflation across emerging and developing economies.

Looking ahead, the MPC expressed optimism that Nigeria’s economic growth would remain resilient, supported by improved oil production, expansion in business activities and ongoing policy reforms. It also projected that inflation would continue to moderate in the medium term, aided by foreign exchange stability, the lagged effects of previous monetary tightening and improved food supply during the harvest season.

However, the Committee cautioned that a prolonged escalation of the Middle East conflict remains the biggest downside risk to the economic outlook and reaffirmed its readiness to take appropriate policy measures to safeguard price and financial system stability.

The next meeting of the Monetary Policy Committee is scheduled for September 21 and 22, 2026.