Nigeria CBN keeps policy rate unchanged as Olayemi Cardoso defends tight stance to curb inflation and stabilise naira

The Central Bank of Nigeria’s Monetary Policy Committee kept the benchmark interest rate unchanged at 26.5% during its meeting on Tuesday in Abuja. Governor Olayemi Cardoso said the decision aimed to curb inflation and stabilize the naira by maintaining a cautious monetary policy stance.

The liquidity ratio was left unchanged at 30%, and the standing lending and deposit facility corridor around the Monetary Policy Rate (MPR) was maintained at +50 and –450 basis points, respectively, signaling continuity in the central bank’s policy framework, officials said.

The Central Bank of Nigeria’s Monetary Policy Committee (MPC) also maintained the Cash Reserve Ratio (CRR) at 45% for commercial banks and 16% for merchant banks, continuing its tight liquidity stance, according to official statements released after the meeting in Abuja on Tuesday.

The decision to hold the MPR at 26.5% follows a series of previous adjustments, including a peak of 27.5% in November 2024 before it was lowered to the current level. Trading Economics reported that the MPC’s May 20, 2026, meeting kept the benchmark rate steady after a 50 basis-point increase in February 2026. Projections from the same source indicate the rate is expected to remain at 26.5% through the current quarter, with potential gradual easing to 24.5% in 2027 and 23% in 2028, contingent on inflation trends.

Governor Olayemi Cardoso reiterated that the decision aims to “stabilise prices” and curb inflationary pressures, emphasizing a “cautious and vigilant stance” to anchor inflation expectations and safeguard macroeconomic stability. Cardoso has argued against returning to “market-distorting interventions,” preferring orthodox interest-rate-driven inflation and foreign exchange management over quasi-fiscal measures, according to central bank communications.

The MPC’s tight policy stance is explicitly linked to efforts to support the naira. Monetary authorities have stated that maintaining a high MPR and tight CRR discourages speculative demand for foreign exchange and makes naira-denominated assets more attractive, thereby supporting the currency. Reports indicate the CBN injected trillions of naira into foreign exchange interventions while the naira appreciated in April, a context in which the bank chose not to loosen rates, sources confirmed.

Analysts interviewed by CNBC Africa described the MPC’s posture as consistent with a “wait and collect data” approach following the February tightening. Reuters-polled economists largely expected the CBN to keep the rate unchanged at 26.5%, indicating broad market alignment with the decision. Domestic commentators noted that the high policy rate translates into lending rates near or above 30%, significantly increasing borrowing costs for firms and households. Some analysts regard maintaining the rate as the “best alternative” amid inflation and foreign exchange pressures, despite the constraints it places on credit growth.

Nigeria’s elevated inflation remains a primary risk to macroeconomic stability, according to MPC communications. Trading Economics highlighted that the current MPR of 26.5% is historically high compared with an average policy rate of 13.63% from 2007 to 2026, underscoring the severity of inflationary conditions. Cardoso has emphasized the importance of anchoring inflation expectations, reflecting concerns about both current and future price levels. Some domestic analysts have warned that inflationary pressures could intensify due to increased liquidity from political spending, suggesting the CBN may need to maintain high rates for a prolonged period.

The policy decision also has implications for credit availability. With the MPR at 26.5%, banks are unlikely to lend below this benchmark, leading to loan rates often ranging between 27% and 30% after risk premiums. The high CRR requirements effectively lock up a significant portion of deposits at the central bank, limiting funds available for lending and reinforcing tight credit conditions. Analysts noted that these factors increase borrowing costs for small and medium-sized enterprises and manufacturers, who already face pressures from energy, foreign exchange, and logistics costs.

The MPC’s retention of all major policy parameters signals a prioritization of macroeconomic stabilization over short-term growth, accepting weaker credit expansion as a trade-off. Analysts suggest that if inflation moderates and foreign exchange pressures ease, the CBN could gradually reduce rates from the current level. However, no official statements have indicated an imminent easing.

The Central Bank of Nigeria’s monetary policy decisions come amid ongoing efforts to restore investor confidence and stabilize the exchange rate over the medium term. The combination of high interest rates and foreign exchange reforms forms part of a broader strategy to manage currency values alongside price stability, officials said. The MPC’s next meeting will likely continue to monitor inflation trends and foreign exchange market developments before considering any adjustments.