At the Central Bank of Nigeria’s 305th Monetary Policy Committee (MPC) meeting held on 19-20 May 2026, the Monetary Policy Rate (MPR) was retained at 26.50%, marking a reversal from the 50bps cut in February 2026.
Key Decisions
- Retained the MPR at 26.50%
- Retained the asymmetric corridor at +50/-450 around the MPR.
- Retained the CRR of Deposit Money banks at 45%.
- Retained the CRR of Merchant Banks at 16%
- Retained 75% CRR for Non-TSA public sector deposits
CBN holds rates steady
The Monetary Policy Committee (MPC) of the Central Bank of Nigeria (CBN) has retained the policy rate at 26.5%, following the conclusion of its 305th meeting. This decision followed the 50bps cut in February. The committee noted that the recent rise in inflation figures, particularly the back-to-back increases recorded in March and April 2026, influenced the action.
Headline inflation printed at 15.69% yearon-year in April, and food inflation accelerated to 16.06%, outpacing the allitem index for the first time in eight months, indicating renewed pressure on household spending amid expansion in private sector activity, evident in April’s Stanbic PMI reading of 52.4.
Other policy parameters remained unchanged. The MPC maintained the asymmetric corridor at +50/-450 basis points around the Monetary Policy Rate (MPR), as well as the Cash Reserve Ratio and liquidity ratio.
This confirms a more cautious policy stance, as domestic conditions no longer justify another rate cut. The key trigger was the renewed uptick in inflation, which broke an 11-month disinflationary trend and signalled that price pressures remain more persistent than previously expected.
Risks remain concentrated around pre-election spending and higher oil-driven FAAC disbursements, both of which could add to system liquidity and intensify FX demand. The CBN has previously warned that politically induced liquidity injections could reinforce inflation expectations.
Against this backdrop, the MPC judged that cumulative tightening from prior policy cycles remains sufficient to anchor expectations, while maintaining a cautious bias given persistent upside risks.
Overall, the MPC’s action reflects a cautious stance, balancing economic support with the need to maintain policy credibility while keeping inflation contained.
Ahead of the MPC meeting, Nigeria’s external reserves remained robust, although slightly moderated from the strong peak recorded in February. Gross reserves had risen to $50.45bn, the highest level in 13 years, with import cover of about 10 months.
Nigeria’s external position remains materially strong, with reserves of around $48bn, giving policymakers confidence that the economy has sufficient FX buffers to absorb external shocks, meet import demand, and support market confidence.
Accordingly, policymakers had little reason to raise rates in the near term purely to defend the naira. However, with US inflation and bond yields moving higher, the naira carry trade has become less compelling. Cutting rates would further compress the yield premium on local
assets, raising the risk of foreign portfolio outflows and renewed pressure on the currency.
Against this backdrop, the MPC maintained its hold, keeping its focus on key risk factors, including the Middle East crisis and its potential pass-through to higher inflation.
The likelihood of CBN monetary tightening in the remainder of the year cannot be ruled out, especially if geopolitical tensions in the Gulf continue to feed into higher domestic inflation.
Market Implication
The latest MPC decision shows that the CBN is choosing stability over further tightening. By holding rates, the committee is keeping
policy tight to fight inflation while giving the economy time to adjust.
For equities, this provides more clarity. Investors are likely to favour strong companies with pricing power, solid cash flows, and the ability to protect margins, especially in banking, telecoms, consumer goods, energy, and cement.
For fixed income, Treasury bills and bonds should remain attractive given still-high rates. However, investors will continue to
compare yields with inflation to know whether they are truly earning a positive real return.
For businesses and households, borrowing costs remain high. The hold decision prevents further pressure, but it does not yet
make loans cheap.
For banks, the decision to hold rates keeps the environment supportive for interest income. With rates still high, banks can continue to earn strong returns from loans and government securities. This is positive for earnings, especially for banks with large deposit bases and good asset quality. However, the high-rate environment also keeps pressure on borrowers, so loan repayment risk remains an important
concern.
For government borrowing, the hold decision means Treasury bills and bonds should remain attractive to investors, given elevated yields. This can support demand at auctions and help the government raise funds locally. However, the government will still have
to borrow at relatively high rates, which keeps debt-service costs elevated.
Bottom Line
The Central Bank of Nigeria (CBN) retained the Monetary Policy Rate (MPR) at 26.50%, alongside other corridors at the conclusion of its 305th MPC meeting, signalling a cautious policy stance amid renewed inflationary pressures and external uncertainties. The decision reflects the bank’s focus on sustaining disinflation momentum, preserving FX stability, and supporting macroeconomic resilience, with external reserves strengthening to approximately $49.49 billion as of mid-May 2026.
Forward guidance would remain firmly anchored on price stability. If inflation remains elevated or exhibits renewed persistence, the baseline policy response is likely to be an extended hold, with a rate hike re-entering consideration if upside risks become more pronounced.
A rate cut would require clearer evidence of sustained disinflation, most likely two to three consecutive monthly declines in inflation, alongside the absence of fresh price shocks. The easing threshold, therefore, remains high and contingent on the evolution of external risks, particularly the Middle East crisis and its potential pass-through to domestic fuel and transport prices and broader price pressures.
Until there is stronger confirmation that inflation is on a durable downward path, the MPC is expected to prioritise macroeconomic stability over premature easing.
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