The Central Bank of Nigeria’s Monetary Policy Committee (MPC) last week chose to stay the course by voting to retain the Monetary Policy Rate (MPR) at 26.5% as inflation ticks up.
At its 305th meeting held on May 19 and 20, the MPC kept all key parameters unchanged: the MPR at 26.5%, the Standing Facilities Corridor at +50/-450 basis points, Cash Reserve Ratio for Deposit Money Bank at 45% for Commercial Banks, 16% for Merchant Banks, and 75% for non-TSA public sector deposits.
Experts said the decision on the surface, looks like inaction, but on closer examination reveals a calculated, reforms-anchored confidence in the direction of the nation’s economy.
That the Committee held firm despite two consecutive months of marginal inflation speaks volumes. Rather than reacting with instant rate hike, the MPC signalled its belief that the current inflationary uptick is transitory, largely imported through global energy price pressures occasioned by the Middle East crisis, and that Nigeria’s domestic buffers are strong enough to absorb the shocks without further monetary tightening.
As reported by the National Bureau of Statistics (NBS) and noted by the MPC, headline inflation rose for the second consecutive month, reaching 15.69% in April 2026, up from 15.38% recorded in March, 2026. The main contributing factor is food inflation, which jumped sharply to 16.06% in April from 14.31% recorded in March, driven by high transportation and logistics costs as well as seasonal supply pressures.
The figure demands attention, since food inflation is the most politically and socially component of the Consumer Price Index (CPI) in Nigeria, where a significant portion of household income goes into feeding. A sustained rise in food prices could erode the purchasing power of ordinary Nigerians and undermine the gains of recent macroeconomic reforms.
However, there are countervailing signals. Core inflation which strips out volatile food and energy prices actually moderated to 15.86% in April from 16.21% in March. More significantly, the 12-month average inflation slowed to 19.16% from 20.05%, marking the sixth consecutive month of decline. Month-on-month headline inflation also eased sharply to 2.13% in April, compared to 4.18% in March.
These numbers suggest that the broader disinflationary trend remains intact, even if the month-on-month headline figure has wobbled. The MPC’s declaration that that the uptick is transitory, appears technically defensible, though it needs to be validated by the coming months’ data.
GROWTH HOLD FIRM, BOTH OIL AND NON-OIL SECTORS EXPAND
On the growth front, the picture is more encouraging. Real GDP expanded by 4.07% in Q4, 2025, up from 3.98% in the previous quarter, driven by gains in both the industrial and agricultural sectors.
Notably, the oil sector grew by 6.79% in Q4 2025, up from the 5.84%, partly contributed to improved downstream activity. The non-oil sector also held its own at 3.99% growth, buoyed by services, particularly information and communication, and transportation and storage.
EXTERNAL BUFFERS: A RARE BRIGHT SPOT
Nigeria’s gross external reserves stood at robust at $49.49billion as of May 15, 2026, up from $48.35billion recorded at the end of March, providing over nine months of import cover for goods and services. This is a significant buffer by any standard, and it reinforces exchange rate stability, which has been one of the more hard won gains of recent economic reforms.
The CBN also welcomed the recent sovereign credit rating upgrade, an external validation of Nigeria’s macroeconomic trajectory.
The successful conclusion of the banking recapitalisation exercise, which produced better-capitalised banks, added another layer of systemic resilience. However, the MPC urged the CBN to remain vigilant against post-recapitalisation risks, a sign that while the process is complete, its full implications for financial system stability are still unfolding.
THE GLOBAL HEADWINDS REMAIN
The MPC’s decision does not exist in a vacuum. Globally, growth is expected to moderate in 2026, weighed down by geopolitical tensions, energy market disruptions, and tighter financial conditions in advanced economies. Global inflation is expected to edge higher in the near term, and most central banks have responded by pausing or slowing their easing cycles.
Nigeria finds itself navigating a tricky environment, one where the impulse to ease monetary policy and stimulate growth must be balanced against the risk of importing further inflationary pressure through a weakened exchange rate or rising commodity prices.
For now, the CBN’s approach, holding rates while monitoring data closely aligns with broader global consensus among emerging market central banks.
The CBN’s decision to hold rates is a confident, reform-backed stance, that says Nigeria’s macroeconomic foundations are strong enough to weather the current global storm without further tightening.
Should food prices continue to rise, or should the Middle East conflict deepen its impact on global energy markets, the MPC may find its confidence tested sooner than expected.
