Analysts Back CBN As MPC Keeps Interest Rate At 26.5%

By MARK ITSIBOR, Abuja; BUKOLA ARO-LAMBO and OLUSHOLA BELLO, Lagos

Analysts and policy experts have backed the Central Bank of Nigeria (CBN) after its Monetary Policy Committee (MPC) held the Monetary Policy Rate (MPR) at 26.5 per cent at its 305th meeting held on May 19–20, describing the decision as prudent given that current inflationary pressures are largely supply-side and externally driven.

The MPC, attended by all 11 members, also retained the asymmetric corridor around the MPR at +50/-400 basis points, the Cash Reserve Ratio (CRR) for deposit money banks at 45 per cent and for merchant banks at 16 per cent, and kept the CRR on non-TSA public sector deposits at 75 per cent.

The committee noted that headline inflation rose to 15.69 per cent year-on-year in April 2026 from 15.38 per cent in March, driven mainly by a sharp spike in food prices and seasonal supply disruptions.

Analysts Say Tightening Has Limits

Commenting on the outcome, the Centre for the Promotion of Private Enterprise (CPPE) praised the MPC’s restraint, saying aggressive monetary tightening would risk stifling productivity, investment and employment without addressing structural bottlenecks.

CPPE Director/CEO, Dr Muda Yusuf, said the inflation uptick is fuelled by global energy market volatility stemming from heightened geopolitical tensions in the Middle East, which has pushed up crude oil prices and transmitted higher costs into domestic energy, transport, logistics and manufacturing.

“Monetary policy is a powerful stabilisation instrument, but it cannot repair supply chains, resolve geopolitical conflicts or eliminate structural production bottlenecks,” he said.

Independent economists and market analysts also echoed this view, arguing that raising rates would be unlikely to cure supply-side shocks and could instead suffocate nascent industrial recovery. They welcomed the CBN’s focus on balancing price stability with support for growth and financial stability.

Experts Warn on Cost of High Interest Rates

Development economist, Dr Justin Amase, said while the CBN’s decision is justified by structural imbalances — including insecurity, inflation and high energy costs — caution must be taken not to further suffocate businesses and households with elevated living and production costs.

He said that while the CBN is anchoring its decisions on inflation control, it must also acknowledge that the purchasing power of most Nigerians has been eroded by double-digit interest rates, which have increased the cost of funds for businesses.

“Industries cannot expand production anymore because the cost of financing has become very high. Purchasing power will keep declining. This will have negative consequences on production and aggregate demand,” Dr Amase said in a discussion with LEADERSHIP.

He urged monetary authorities to liaise with fiscal authorities to address structural challenges, including fiscal deficits, poor infrastructure and insecurity, as well as election-related spending pressures.

Cardoso Clarifies Stamp Duty, FX Position

CBN Governor, Olayemi Cardoso, speaking at the post-MPC press conference in Abuja, reiterated the bank’s position that Nigeria’s inflationary pressures are partly global and structural.

He also clarified that the N50 stamp duty appearing on retail bank transaction alerts is a federal government tax collected through banks, not a bank levy.

“The stamp duty is not the outcome of the banking system… it emanates from the tax authorities,” he said. He also disclosed that the CBN has set up a standing committee to address recurring consumer complaints, including unexplained charges and fragmented transaction alerts.

The governor acknowledged that many customers receive multiple notifications for a single transaction and said the CBN is reviewing reforms to consolidate alerts into single, itemised messages to improve transparency.

He further stated that the apex bank’s direct participation in the foreign exchange market has been limited, accounting for about 1.2–1.3 per cent of daily turnover, dismissing suggestions of heavy intervention to defend the naira.

According to him, daily FX market turnover has expanded to about $550 million from roughly $100 million earlier in the administration, with periodic peaks above $1 billion.

MPC Cites Macroeconomic Buffers

The MPC highlighted several buffers supporting Nigeria’s resilience to external shocks, including exchange rate stability, improved external reserves, a well-capitalised banking system following recent recapitalisation, and ongoing fiscal consolidation.

The committee noted the formal conclusion of the recapitalisation exercise, which left 33 banks with stronger financial soundness indicators, while urging continued monitoring for post-recapitalisation risks.

On broader macroeconomic performance, the MPC reaffirmed that Nigeria’s real GDP growth and non-oil sector expansion provide support for its policy stance. Real GDP grew by 4.0 per cent in Q4 2025, with the non-oil sector expanding by 3.99 per cent year-on-year, driven by ICT and transport services.

CBN to Publish New FX Manual

As part of efforts to deepen market efficiency, Governor Cardoso announced that the CBN will publish a revised Foreign Exchange Operations Manual — the fourth edition and the first since 2017 — effective June 1, 2026.

The updated manual aims to reduce friction for exporters repatriating FX proceeds and encourage greater formalisation of foreign exchange flows.

Market Reaction and Outlook

Market reaction was muted but broadly positive, with analysts noting that the combination of a steady MPR, ongoing FX stability and a non-disruptive banking recapitalisation supports investor confidence while avoiding policy shocks that could hinder growth.

They, however, urged fiscal authorities and sector regulators to complement monetary policy with measures to unclog supply chains, improve logistics infrastructure and stabilise food markets.