- Analysts call rate hold at meeting
- Uwaleke, Meristem call for ‘hold and monitor’
- Businesses, Ilias call for supportive policy
- Harms investment, expansion, employment
- Hold policy, evaluate inflation pressures, CIBN
- Ekpo calls on FG to complement CBN’s efforts
Nigeria’s boardrooms, factory floors, financial markets and trading hubs are entering what could prove to be one of the most consequential weeks of the year as the Central Bank of Nigeria’s (CBN) Monetary Policy Committee (MPC) convenes to decide whether the country’s prolonged era of tight monetary policy has reached its turning point or whether the battle against inflation still demands higher-for-longer interest rates.
The stakes are high for businesses and financial markets alike, with manufacturers hoping for lower borrowing costs, banks seeking clarity on future interest-rate trends and investors looking for signals that could redefine portfolio strategies in the second half of the year.
Financial markets enter the MPC meeting with cautious optimism as easing inflation, stronger reserves and improved exchange-rate stability strengthen confidence in the economy. However, renewed volatility in global commodity markets continues to temper expectations of an imminent shift towards lower interest rates.
Although the CBN delivered its first policy easing in February by reducing the Monetary Policy Rate (MPR) by 50 basis points from 27 percent to 26.5 percent, policymakers paused at their May meeting, signalling that the fight against inflation was not yet over despite improving macroeconomic conditions.
That decision has now set the stage for one of the most closely watched MPC meetings in recent years.
The central question confronting policymakers is whether recent improvements in inflation and macroeconomic indicators provide sufficient justification to begin easing monetary conditions or whether caution remains the wiser course.
At the conclusion of its 305th MPC meeting held in May, the Committee voted unanimously to retain the benchmark interest rate at 26.5 percent after implementing the February reduction.
Explaining the decision, Olayemi Cardoso, the CBN governor, argued that although inflation had shown signs of moderation over a longer period, recent price increases required continued vigilance.
“The MPC recognises its transitory nature and remains confident that the current macroeconomic environment is sufficiently robust to support a return to disinflation,” Cardoso said after the May meeting.
His remarks reinforced the CBN’s commitment to preserving macroeconomic stability even as businesses continue to advocate lower borrowing costs to stimulate investment and production.
Analysts expect another pause
Among market analysts, the dominant expectation remains that the MPC will leave policy rates unchanged while monitoring further inflation developments.
Felicia Awolope, economist and investment researcher at Meristem Securities Limited, believes external risks continue to outweigh arguments for an immediate rate cut.
“Inflationary risks are still very much present, particularly with the ongoing geopolitical tensions in the global space, so that should reduce the likelihood of a cut. The fact that global interest rates might also remain higher for longer due to this same price risk also supports a hold stance,” she said.
Awolope equally dismissed expectations of another rate increase, stating:
“I don’t expect a hike because pressures are not expected to escalate inflation figures too significantly in the near term.
“So the MPC is not likely to hike and worsen financing conditions for the real sector. I expect a hold stance,” she stressed.
Her assessment reflects growing consensus among financial market participants that while inflation risks persist, they have not deteriorated sufficiently to justify further monetary tightening.
Meristem sees steady rates through year-end
Matilda Adefalujo, investment research analyst at Meristem Securities Limited, also expects the central bank to maintain its cautious posture well beyond this week’s meeting.
“We expect the MPC to hold the MPR at 26.50 per cent through H2 2026, adopting a cautious wait-and-see stance as it monitors the inflation trajectory.
“The moderate pace of the recent inflation uptick affords the monetary authority room to pause, while the need to maintain attractive rates amid a potentially higher-for-longer global interest rate environment and persistent price uncertainty reinforces this stance,” she noted.
According to her, tightening policy further could unnecessarily weaken domestic demand, while cutting rates now would risk undermining progress already made in controlling inflation.
Not all economists, however, share this view.
Development economist Aliyu Ilias believes improving macroeconomic conditions provide sufficient room for the CBN to begin supporting economic growth through lower interest rates.
“The MPC meeting is expected to cut the MPR by at least 50 basis points. This is because there is a gradual easing and we cannot continue to sacrifice growth to reduce inflation; it appears counterproductive,” he said.
According to Ilias, persistently high borrowing costs are increasingly constraining productive sectors of the economy.
“Industry, manufacturing sector, and MSMEs are weakened with this handling of MPR,” he argued.
His position reflects concerns expressed by sections of Nigeria’s business community that prolonged monetary tightening is suppressing investment, expansion and employment creation.
Uwaleke backs ‘hold and monitor’
Adding another influential voice to the debate, Uche Uwaleke, president of the Capital Market Academics of Nigeria (CMAN), believes the CBN is likely to prioritise policy consistency over immediate adjustments.
According to him, the Committee’s communication after the May meeting clearly indicated that members regarded recent inflationary pressures as largely temporary and externally driven.
While acknowledging May’s increase in headline inflation to 15.9 per cent, Uwaleke argued that the rise remains relatively modest within the broader inflation trajectory.
“Unless there is evidence of a more persistent and broad-based inflationary trend, especially in core inflation, which is a better measure of underlying price pressures, the MPC is unlikely to interpret the latest data as warranting a tightening of monetary policy,” he said.
He also pointed to the already restrictive monetary environment, noting that with the MPR at 26.5 per cent, a Cash Reserve Requirement of 45 per cent and tight liquidity management, monetary conditions remain sufficiently restrictive.
According to him, previous policy tightening is still filtering through the economy.
“Monetary policy typically operates with a lag, meaning that the full effects of previous rate increases and liquidity tightening are still working their way through the economy,” he explained.
Uwaleke also identified exchange-rate stability as another factor likely to influence the Committee’s thinking.
“As long as external reserves remain adequate and foreign exchange market conditions continue to improve, the Committee may feel more comfortable allowing existing policy measures to continue taking effect rather than introducing additional tightening,” he said.
He added that the approach of the election cycle introduces additional fiscal risks but argued these are more appropriately addressed through close monitoring than immediate monetary tightening.
“My base-case expectation is that the MPC will once again retain the Monetary Policy Rate at 26.5 per cent, maintain the current asymmetric corridor around the MPR, and leave the Cash Reserve Requirement and other policy parameters unchanged,” Uwaleke said.
He expects the Committee’s communiqué to reaffirm its commitment to price stability while signalling readiness to act should inflationary pressures become more persistent.
CIBN tips CBN to retain benchmark rate
The Chartered Institute of Bankers of Nigeria (CIBN) forecasts that the Central Bank of Nigeria will leave its benchmark interest rate unchanged, reinforcing expectations of another cautious pause as policymakers weigh moderating inflation against lingering global risks.
Speaking in Lagos, Dele Alabi, the CIBN president and chairman of council, said the institute expects the MPC to retain the current benchmark rate, arguing that recent economic indicators do not yet justify either a rate increase or an immediate easing cycle.
“I expect the MPC to keep the interest rate constant and monitor developments over the next couple of months before considering any adjustment,” Alabi said.
According to him, maintaining the existing policy stance would provide the apex bank with additional time to evaluate evolving inflationary pressures, global economic uncertainties and the effectiveness of current monetary measures before making further adjustments.
He noted that allowing more time for policy transmission would enable the CBN to make better-informed decisions as macroeconomic conditions continue to evolve.
Former MPC member also backs policy pause
Supporting the case for policy continuity, Akpan Ekpo, a former Monetary Policy Committee member and economist, also urged the committee to maintain the current benchmark interest rate, citing elevated geopolitical uncertainties and external inflationary risks.
Ekpo observed that renewed tensions involving the United States and Iran have the potential to push global crude oil prices higher, with possible implications for domestic inflation through increased transportation and production costs.
However, he argued that such inflationary pressures are likely to prove temporary and therefore do not warrant a further increase in borrowing costs.
Instead, he advised policymakers to retain the current policy stance while closely monitoring both domestic and international economic developments before considering any adjustment.
Beyond monetary policy, Ekpo called on the federal government to complement the CBN’s efforts by increasing investment in productive sectors of the economy, arguing that stronger fiscal support remains critical to sustaining growth and improving macroeconomic stability.
He also urged policymakers to consider recommendations by the Manufacturers Association of Nigeria (MAN) aimed at boosting domestic production and strengthening industrial competitiveness.
Markets await policy signal
With the policy decision largely expected to result in another pause, investors are increasingly focusing on what the MPC says next rather than what it does.
The Committee’s post-meeting communication is expected to offer important guidance on the future path of interest rates, shaping expectations across Nigeria’s financial markets. Any indication that the CBN is moving closer to monetary easing could influence bond pricing, equity valuations, exchange-rate expectations and capital flows.
For now, however, economists expect policymakers to maintain a cautious stance, arguing that preserving macroeconomic stability remains paramount despite growing calls to ease financing costs. The July meeting is therefore expected to reinforce the CBN’s preference for policy consistency while keeping the door open for a gradual shift once inflation risks become more firmly contained.
