CBN Retains Interest Rate at 26.5% Amid Inflation Increase

By Àkànní Oluwáṣégun Michael

The Central Bank of Nigeria on Wednesday retained its benchmark interest rate at 26.5 per cent, as the Monetary Policy Committee (MPC) maintained a cautious stance in response to rising inflation and global economic pressures.

CBN Governor, Olayemi Cardoso, announced the decision on Wednesday at the end of the Monetary Policy Committee’s 305th meeting in Abuja.

The move follows a 50 basis point rate cut in February, when the Monetary Policy Rate (MPR) was reduced from 27 per cent.

Despite that earlier easing, inflation has continued to climb. According to the National Bureau of Statistics, headline inflation rose to 15.69 per cent in April, marking a steady increase from previous months.

Drivers of Inflation and Policy Rationale

Explaining the committee’s decision, Cardoso said recent inflationary pressures were largely driven by external shocks rather than domestic demand.

He pointed to rising global energy prices and geopolitical tensions, particularly in the Middle East, which have disrupted oil supply chains and increased transportation and logistics costs.

“Although inflation has risen marginally for two consecutive months, largely induced by external shocks, the MPC recognises its transitory nature. The current macroeconomic environment is sufficiently robust to support a return to disinflation,” Cardoso stated.

These external pressures have filtered into Nigeria’s domestic economy, pushing up the cost of goods and services. However, the CBN maintains that the current inflation trend is temporary and expects a gradual return to lower inflation levels.

The committee also stressed that maintaining the current rate would help anchor inflation expectations, while allowing time to assess the full impact of earlier policy measures on the economy.

The Monetary Measures

Beyond the interest rate decision, the MPC retained key policy parameters aimed at managing liquidity in the financial system.

The Cash Reserve Ratio (CRR) remains at 45 per cent for commercial banks and 16 per cent for merchant banks, limiting the volume of funds available for lending.

The asymmetric corridor around the MPR was also held at +50 and -450 basis points, a structure designed to discourage banks from holding excess funds with the central bank and instead encourage lending to the real sector.