After nearly six months of holding borrowing costs at historic highs, Nigeria’s monetary authorities are once again at a crossroads. The Monetary Policy Committee (MPC) of the Central Bank of Nigeria begins its meeting in Abuja on Monday, with markets keenly awaiting what could be the first rate cut since the tightening cycle peaked late last year.
Expectations are finely balanced. While some analysts foresee the start of a gradual easing phase, others argue that lingering risks — from fiscal pressures to exchange rate volatility — justify continued caution.
Case for a Rate Cut
A growing number of market participants anticipate a modest reduction in the benchmark Monetary Policy Rate (MPR), with projections clustered between 50 and 100 basis points. A recent poll by BusinessDay indicates that slowing inflation, relative exchange rate stability and improving macroeconomic indicators have strengthened the argument for easing.
Nigeria’s headline inflation rate moderated to 15.10 percent in January 2026, down slightly from 15.15 percent in December 2025, according to the latest Consumer Price Index released by the National Bureau of Statistics. Though marginal, the decline has bolstered confidence that price pressures may have peaked, opening a window for policy recalibration.
Among the more outspoken advocates of a significant move is Charlie Robertson, author of The Time Travelling Economist. He argues that the MPC could afford a deeper cut of 200–250 basis points while still maintaining a sizeable real interest rate buffer. With inflation at roughly 15 percent and the policy rate at 27 percent, borrowing costs remain sharply restrictive in real terms.
Razia Khan, managing director and chief economist for Africa and the Middle East at Standard Chartered Bank, expects a more measured adjustment. She projects at least a 100 basis points cut, citing January’s favourable inflation data as sufficient justification for a cautious start to easing.
Similarly, Ayokunle Olubunmi of Agusto & Co. anticipates a 50 basis points reduction in the MPR, alongside a 100 basis points cut in the Cash Reserve Requirement (CRR). At Optimus by Afrinvest, Ayodeji Ebo suggests that a 50–100 basis points cut would signal a strategic pivot toward supporting economic activity while preserving price stability.
Olufunmilola Adebowale of Parthian Capital takes a slightly bolder view, projecting a 100–200 basis points reduction. She points to broad-based moderation across headline, food and core inflation metrics as strengthening the case for stimulus aimed at supporting growth.
Additional support for easing comes from improving external fundamentals. A recent report by Bloomberg notes that the naira has appreciated nearly 7 percent since the start of the year, while external reserves remain robust at approximately $48.5 billion. These developments provide policymakers with additional room to manoeuvre without immediately undermining currency stability.
The Argument for Holding Steady
Despite the growing consensus around easing, not all analysts are convinced that the time is right.
Economists at FSDH Merchant Bank expect the MPC to maintain the MPR at 27 percent. In their view, a hold decision could keep short-term Treasury bill and bond yields suppressed amid abundant liquidity, while long-dated yields remain flat to slightly higher due to sustained government borrowing. They argue that maintaining current rates would help anchor foreign exchange stability and sustain tight liquidity management, potentially generating a neutral-to-positive impact on equities as real yields improve.
Analysts at Quest Merchant Bank echo this cautious tone. While acknowledging that the MPC adopted a less aggressive posture in 2025 and may pivot toward easing this year, they warn that elevated fiscal deficits, exchange rate sensitivities and residual inflation risks still warrant prudence.
The Financial Markets Dealers Association also leans toward a hold, suggesting the committee may rely more heavily on liquidity management tools rather than headline rate cuts. Adjustments to the asymmetric corridor around the MPR, they argue, could lower interbank rates and ease private-sector funding conditions without diluting the CBN’s anti-inflation stance.
Policy Backdrop and Market Watch
At its last meeting in November, the MPC retained the MPR at 27 percent, adjusted the Standing Facility corridor to +50/-450 basis points around the benchmark, maintained the CRR at 45 percent for Deposit Money Banks, 16 percent for Merchant Banks and 75 percent for non-TSA public sector deposits, and left the Liquidity Ratio unchanged at 30 percent. The committee emphasized its commitment to consolidating gains in price stability through data-driven policy decisions.
With inflation now easing modestly and macroeconomic indicators showing tentative improvement, the coming decision may mark a turning point. Whether the MPC opts for a symbolic first step toward easing or chooses to reinforce its cautious stance, the outcome will set the tone for monetary conditions in 2026 — and signal how confident policymakers are that Nigeria’s inflation fight is firmly under control.