61% of Nigerians demand interest rate cut ahead MPC

The Central Bank of Nigeria (CBN) has left its benchmark interest rate unchanged at 26.5 per cent following its 305th Monetary Policy Committee (MPC) meeting, which concluded on 20 May in Abuja. The decision marks a continuation of the rate set during the previous meeting in February, when the MPC reduced the Monetary Policy Rate (MPR) by 50 basis points from 27 per cent to 26.5 per cent. This follows a period of stability, during which the rate had remained fixed at 27 per cent since November 2025. According to CBN Governor Olayemi Cardoso, the MPC chose to hold the rate steady due to recent increases in inflation and external economic shocks. He stated that the committee acknowledges these developments as temporary and expressed confidence that the broader macroeconomic landscape remains stable enough to allow for a return to disinflation. The decision comes amid rising inflation, which has climbed for three consecutive months, reaching 15.93 per cent in May, according to data released by the National Bureau of Statistics (NBS). This rise was primarily attributed to increased food prices, influenced by global oil price hikes linked to tensions in the Middle East. These tensions disrupted oil shipments through the Strait of Hormuz, a critical artery for international oil trade. The surge in inflation had previously been declining through 2025 and into early 2026 before being reignited by geopolitical conflicts involving the United States, Israel, and Iran. These disputes led to a spike in global oil prices, which in turn raised the cost of transportation, food, and fertilizers. Although a ceasefire agreement was reached on 17 June, offering a potential opening for diplomatic talks, renewed violence has continued to create uncertainty in global energy markets and shipping routes through the Strait of Hormuz. Economists and financial analysts have presented varied perspectives on whether the MPC will adjust the rate at its upcoming meeting, scheduled for 20 and 21 July. Some believe the central bank will maintain the current rate, while others suggest that improved inflation trends and better macroeconomic conditions could pave the way for a monetary easing cycle. Felicia Awolope, an economist and investment researcher at Meristem Securities Limited, anticipates that the CBN will retain the MPR at 26.5 per cent during the next MPC meeting. She cited the recent inflationary pressures caused by ongoing geopolitical tensions as a reason for maintaining the current monetary policy stance. According to her, the persistence of global interest rates at higher levels, driven by similar inflationary concerns, further supports the argument for holding the rate rather than cutting it. She noted that the MPC is unlikely to raise the rate either, given that current pressures are not expected to cause a significant jump in inflation figures soon. “I expect a hold stance,” she said, emphasizing that raising the rate would unnecessarily burden the real economy. Matilda Adefalujo, an investment research analyst at Meristem Securities Limited, echoed similar sentiments, predicting that the MPC would keep the MPR at 26.50 per cent for the remainder of 2026. She argued that the CBN is likely to take a cautious approach, carefully observing how inflation evolves in the coming months. Maintaining competitive interest rates in a context where global rates may stay high for an extended period, combined with ongoing uncertainties around pricing, reinforces the rationale for keeping the rate unchanged. Other experts, however, have suggested that the MPC might consider a rate cut if inflation begins to show signs of stabilizing. They pointed to the possibility that the current inflationary pressures, though concerning, may not persist indefinitely. If global tensions ease and oil prices stabilize, the central bank could find itself in a position to lower borrowing costs to stimulate economic activity. However, such a scenario depends heavily on the evolution of both domestic and international economic conditions. With the MPC's next meeting approaching, the central bank faces the challenge of balancing inflation control with the need to support growth. The outcome of this meeting will depend on how effectively the CBN can manage the dual pressures of rising commodity prices and the desire to foster a more favorable business climate. As the situation unfolds, all eyes will be on the MPC’s decisions and their implications for Nigeria’s economic outlook.