The Central Bank of Nigeria (CBN) has signalled that there might be no rush for an easing cycle this week even though inflation slowed in June, marking the first slowdown since the Middle East tensions began in February.
Olayemi Cardoso, the CBN governor, said on Thursday that authorities had projected a rate cut was imminent as inflation began gradual cooling but the longer-than-necessary US-Iran war dimmed that outlook.
“There were 11 months of continuous disinflation,” Cardoso said at BusinessDay’s CEO Forum, adding that the trend had strengthened expectations that “over a period of time, we would expect interest rates to begin to moderate.”
Investors have been searching for signs that the Abuja-based bank was nearing an easing cycle after inflation cooled for 11 straight months to February 2026 before beginning to trend upward afterwards.
But Cardoso’s remarks meant policymakers were cautious of external shocks and their effects on domestic price risks, suggesting rates may remain higher for longer.
“If not for the fact that we had this, we had projected that going into next year, inflation would have been down to very moderate levels,” he said
Cardoso defended the bank’s decision to hold rates at its last meeting, despite market expectations of an impending policy pivot.
“We didn’t cut, and believe me, we saw things that most other people didn’t see.”
He said the Monetary Policy Committee (MPC), which is expected to meet starting today, would remain guided strictly by data rather than market sentiment, and credited the early implementation of economic reforms with helping Nigeria withstand recent global shocks.
“One of the reasons for that is the fact that we had undertaken the reforms a lot earlier,” Cardoso said. “We had resilience, and we were able to withstand the shocks.”
Eight analysts polled by BusinessDay expect the MPC to maintain its tight monetary policy stance as inflation remains elevated at 15.91 percent and the naira faces renewed pressure, with the widening gap between the official and parallel market rates strengthening the case for keeping interest rates unchanged.
The June inflation reading followed three consecutive months of increases. However, analysts said the marginal moderation was not sufficient to justify a rate cut, particularly as the economy continues to face risks from exchange rate movements, geopolitical tensions, elevated energy prices and food inflation.
Ayokunle Olubunmi, head of Financial Institutions Ratings at Agusto & Co, said the MPC was likely to hold rates because of recent pressure on the exchange rate.
“I think the MPC will hold rates constant given the recent pressure on the exchange rate. The inflation rate has also not declined significantly to justify a rate cut,” Olubunmi said.
Funmi Adebowale, head of research at Parthian Securities, also expects the MPC to maintain the current policy rate at its meeting next week.
“Although headline inflation eased marginally to 15.91 percent in June, following three consecutive months of increases, the committee is unlikely to interpret the decline as the beginning of a sustained disinflation trend,” Adebowale said.
She said the renewed escalation of geopolitical tensions in the Middle East continued to pose a significant upside risk to inflation.
“In addition, the recent slight depreciation of the naira, partly reflecting seasonal demand for foreign exchange associated with summer travel, warrants close monitoring,” she said.
While the weakness may prove temporary, Adebowale said the MPC was likely to remain cautious because of the potential pass-through to domestic prices.
“Against this backdrop, we expect the committee to retain a tight monetary policy stance to preserve price and exchange rate stability while assessing whether the moderation in inflation can be sustained over the coming months,” she said.
Ayodeji Ebo, an investment professional, said renewed pressure on the foreign exchange market and the widening gap between the official and parallel market rates strengthened the case for maintaining a tight monetary stance.
“While inflation declined in June, it remains elevated, and the committee will likely want to see a sustained moderation before easing,” Ebo said.
He said maintaining tight monetary policy would support naira stability and help sustain foreign portfolio inflows.
Ayodele Akinwunmi, chief economist at United Capital, expects the MPC to keep all policy rates unchanged, saying a hold would underscore its commitment to a tight monetary stance.
“Headline inflation eased slightly in June to 15.91 percent, but remains well above the bank’s upper limit of the short- to medium-term target of 9 percent and its 2026 forecast of 12.94 percent,” Akinwunmi said.
“With inflation still elevated and the need to preserve foreign exchange stability, a hold decision appears most prudent.”
He added that the upcoming general election cycle could make it difficult for the MPC to justify lowering interest rates.
Tunde Abidoye, head of research at Quest Merchant Bank, said the external environment was also not supportive of a policy pivot.
“First, the external environment is still not supportive of a policy pivot. The situation in the Middle East remains a key source of uncertainty, particularly for energy markets,” Abidoye said.
“With Brent crude back above $80/bbl, the risk is that higher energy prices feed into global inflation at a time when inflation in major economies has not fully returned to target.”
He said inflation in the United States remained above three percent, while recent communication from Fed Chair Kevin Warsh suggested the Federal Reserve remained cautious about declaring victory over inflation.
“That points to a ‘higher-for-longer’ global rates environment and reduces the room for emerging and frontier market central banks to ease prematurely,” Abidoye said.
He added that domestic inflation at 15.9 percent remained uncomfortably high.
“Admittedly, the inflation trajectory has improved, but one or two favourable prints are not enough to justify a shift in stance. The MPC will likely want to see a clearer pattern of disinflation and greater confidence that underlying price pressures are easing sustainably before it contemplates rate cuts,” he said.
“In my view, the question before the MPC is not whether easing will eventually come, but whether the conditions for easing have been sufficiently established. At this stage, the answer is probably no.”
Abidoye said the cost of waiting another meeting and gathering more evidence appeared lower than the risk of easing too early and having to reverse course later.
“Overall, I think the committee will opt for caution and leave policy rates unchanged, while maintaining a data-dependent tone and signalling that it remains focused on securing durable disinflation,” he said.
Uche Uwaleke, professor of Capital Markets at Nasarawa State University and president of the Capital Market Academics of Nigeria, also expects the MPC to maintain a cautious stance.
He said the latest increase in headline inflation to 15.9 percent introduced a new consideration but remained relatively modest when viewed against the broader inflation trajectory.
“While the rise suggests that price pressures have not completely dissipated, it is still consistent with the committee’s earlier assessment that inflation may experience intermittent increases before resuming its downward path,” Uwaleke said.
“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.”
Uwaleke said the significant degree of monetary tightening already in place also supported a hold decision.
With the MPR at 26.5 percent, the CRR for deposit money banks at 45 percent and a relatively restrictive liquidity management framework, he said monetary conditions remained sufficiently tight.
“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. Raising rates further at this stage could impose unnecessary costs on economic activity without delivering proportionate gains in reducing inflation,” he said.
He said the exchange rate would remain central to the MPC’s deliberations, noting that much of Nigeria’s inflation had historically been imported through exchange rate depreciation.
“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,” Uwaleke said.
The approaching election season could also create inflationary pressures through increased fiscal spending, higher liquidity and stronger aggregate demand, he said.
However, Uwaleke expects the MPC to use forward guidance and closely monitor fiscal developments rather than react pre-emptively with another rate hike.
“Against this backdrop, my base-case expectation is that the MPC will once again retain the Monetary Policy Rate at 26.5 percent, maintain the current asymmetric corridor around the MPR, and leave the Cash Reserve Requirement and other policy parameters unchanged,” he said.
Muda Yusuf, chief executive officer of the Centre for the Promotion of Private Enterprise, said the June inflation data did not warrant further monetary tightening.
“Headline inflation has largely stabilised, core inflation continues to moderate and the principal drivers of inflation remain structural rather than demand-induced,” Yusuf said.
He expects the MPC to maintain the current monetary policy stance.
Yusuf said the immediate policy priority should be for monetary authorities to collaborate with fiscal authorities to accelerate reforms that expand food supply, improve logistics, reduce energy and production costs, reduce debt service costs, strengthen domestic value chains and enhance productivity.
“These measures offer the most sustainable path to lower inflation, stronger growth and improved living standards,” he said.
Razia Khan, managing director and chief economist for Africa and the Middle East Global Research at Standard Chartered Bank, said headline inflation was 15.9 percent year-on-year in June, broadly unchanged from May, while food inflation accelerated.
She said the escalation of the Middle East conflict and the pricing of domestic fuel in US dollars mean the bank no longer expects policy easing in 2026.
The broad expectation of another rate hold reflects the MPC’s difficult policy trade-off: inflation has moderated slightly, but remains elevated, while renewed naira pressure and external risks could quickly feed into domestic prices.
With the MPR at 26.5 percent, the CRR at 45 percent and the asymmetric corridor unchanged, analysts expect the CBN to prioritise monetary and exchange rate stability over an immediate rate cut, while waiting for clearer evidence that inflation is on a sustained downward path.
Wasiu Alli is a business, economics cum data journalist with strong expertise covering macro trends, capital markets, government policies, corporate earnings and comparative economics analysis. Alli turns raw data into trends that not only tells compelling stories but nudges investors to make valued and informed decisions. He’s an alumnus of Lagos State University and trained at Lagos Business School. He formerly heads the Companies and Markets desk at BusinessDay where he writes and supervises the production of well researched articles on earnings updates, corporate sectoral comparisons, market intelligence as well as interviews with C-suite executives.
