The Central Bank of Nigeria is expected to maintain or raise its benchmark Monetary Policy Rate (MPR) at its upcoming Monetary Policy Committee (MPC) meeting, following its 50-basis-point rate cut to 26.5% in February 2026.
The February decision was supported by easing inflation, exchange rate stability, stronger external reserves, and improving macroeconomic conditions.
However, since then, external developments, particularly renewed tensions in the Middle East, have introduced fresh inflationary and external sector risks.
These shifting conditions are likely to make the MPC more cautious, favouring a pause or modest tightening to assess the direction of key economic indicators before considering further easing.
Reasons MPR may be held or raised
1. Inflation has resumed an upward trend
Nigeria’s disinflation trend has shown signs of reversal.
After 11 consecutive months of disinflation from April 2025 to February 2026, headline inflation resumed its upward trend to 15.38% in March and 15.69% in April 2026, reflecting renewed pressure from rising energy costs and supply-side disruptions linked to global oil market volatility.
Core inflation, which excludes farm produce and energy prices and provides a clearer measure of underlying price pressures, declined to 15.86% year-on-year in March 2026, but rebounded sharply in April to February levels. Every month, core inflation rose to 4.03%, while the index climbed to 137 points, its highest level in 26 months.
Food inflation has also remained elevated, staying above the 16.06% year-on-year recorded in November 2025.
At its February meeting, the CBN cited sustained disinflation as one of the major reasons for cutting rates. With inflation now showing renewed pressure, the justification for another rate cut has weakened considerably, raising the possibility of a marginal policy tightening.
2. Exchange rate stability remains fragile
Although the naira has remained relatively stable in recent months, this stability remains vulnerable to external shocks.
Nigeria’s foreign exchange market remains highly sensitive to changes in oil prices, capital flows, and global risk sentiment.
Any prolonged external disruption could increase pressure on foreign exchange supply and weaken recent gains in market stability.
Given this uncertainty, the CBN may prefer to maintain or hike the current rates to preserve confidence in the foreign exchange market.
Currently, the naira has largely remained range-bound within the N1,350–N1,370/$ band since the February meeting, without any meaningful appreciation.
3. External reserves have lost momentum
External reserves were another major factor behind the CBN’s February rate cut.
At the time, stronger reserves supported exchange rate stability and improved investor confidence.
The CBN had pointed to reserve accretion as evidence of external sector strength, with reserves rising to a 13-year high of $48 billion in February 2026 and briefly crossing the $50 billion mark in March.
However, reserve growth has since slowed, with reserves retreating to the $48 billion level.
While reserves remain relatively healthy, the lack of further improvement reduces the case for further easing and may reinforce the MPC’s cautious stance.
The MPC is likely to wait for clearer signs of sustained reserve accretion before easing further.
4. Rising petrol prices
The relative stability in domestic fuel prices seen through late 2025 has come under pressure.
Recent increases in global crude oil prices have filtered into the domestic market, raising petrol prices and increasing transportation and logistics costs.
Data from the National Bureau of Statistics showed that the average retail price of petrol, which had declined 13.40% year-on-year to N1,048.63 in December 2025, increased by 22.88% in the first quarter of 2026.
Every month, petrol prices rose 2.13% month-on-month to N1,051.47 in March 2026 from February levels.
Transport costs have also reflected this pressure. Average intra-state bus fares rose 14.86% month-on-month to N1,373.49 in March, while inter-state travel costs increased to N59,564.12, reflecting significant upward cost pressure.
This matters because fuel remains a major input cost across the Nigerian economy. Higher fuel prices raise production, distribution, and transportation costs, which ultimately feed into broader consumer prices.
For the MPC, this creates a fresh inflation risk that could strengthen the case for modest monetary tightening.
5. Nigeria remains highly exposed to external oil shocks
Nigeria’s economy remains heavily exposed to developments in the global energy market.
Despite the presence of the Dangote Refinery with its 650,000 barrels-per-day refining capacity, the economy remains highly dependent on petroleum products for transportation, industrial activity, and broader economic operations.
This means global oil market disruptions can quickly translate into higher domestic costs and inflationary pressure.
Domestic crude oil production has improved from an average of 1.38 million barrels per day in March 2026 to 1.49 million barrels per day in April, up from 1.31 million barrels per day earlier in the year.
However, Nigeria remains vulnerable to external oil shocks, especially if global supply disruptions persist.
While higher oil prices can support export earnings, the immediate impact on domestic energy costs often creates short-term inflation risks. This external vulnerability strengthens the case for policy caution or tightening.
Likely MPC outcome
The adjustment of economic indicators points to a likely hold or rise decision.
While inflation remains significantly lower than its 2025 peak and exchange rate conditions have improved, recent external shocks have introduced enough uncertainty to justify a wait-and-see or hawkish approach.
The MPC is therefore more likely to maintain the MPR at 26.5% or raise it by 25 basis points this month while monitoring inflation, exchange rate developments, and external reserve performance before considering any further policy easing.
