The Central Bank of Nigeria's Monetary Policy Committee faces divergent economist opinions ahead of its July 20-21 meeting, with some advocating a rate hold and others a cut, reflecting uncertainty over inflation and growth dynamics.
Background of Recent MPC Decisions
At its 305th MPC meeting in May 2025, the committee retained the Monetary Policy Rate at 26.5 percent, following a 50-basis-point cut in February from 27 percent. The rate had been held at 27 percent since November 2024. CBN Governor Olayemi Cardoso explained the hold was due to a recent uptick in inflation and external shocks. He stated, 'The MPC recognises its transitory nature and remains confident that the current macroeconomic environment is sufficiently robust to support a return to disinflation.'
Inflation Trends and Geopolitical Factors
National Bureau of Statistics data showed headline inflation rose for the third consecutive month to 15.93 percent in May, from 15.69 percent in April and 15.38 percent in March. The increase was driven by higher food prices linked to rising global oil prices following Middle East tensions, which disrupted shipping through the Strait of Hormuz. Inflation had been declining through 2025 and early 2026 before geopolitical conflicts involving the US, Israel, and Iran pushed up oil, transportation, food, and fertiliser costs. A ceasefire on June 17 provided a window for negotiations, but renewed hostilities continue to fuel uncertainty.
Economists Predict Hold Stance
Felicia Awolope, an economist and investment researcher at Meristem Securities Limited, expects the MPC to retain the benchmark rate due to inflationary risks from ongoing geopolitical tensions. She said, 'Inflationary risks are still very much present, particularly with the ongoing geopolitical tensions in the global space, so that should reduce the likelihood of a cut.' She added that global interest rates may remain higher for longer, supporting a hold. Awolope does not anticipate a hike, noting pressures are not expected to escalate inflation significantly in the near term. 'I don't expect a hike because pressures are not expected to escalate inflation figures too significantly in the near term. So the MPC is not likely to hike and worsen financing conditions for the real sector. I expect a hold stance,' she said.
Matilda Adefalujo, also an investment research analyst at Meristem Securities Limited, forecast the MPC would maintain the MPR at 26.50 percent through the second half of 2026, adopting a cautious wait-and-see stance while monitoring inflation. She stated, 'The moderate pace of the recent inflation uptick affords the monetary authority room to pause, while the need to maintain attractive rates amid a potentially higher-for-longer global interest rate environment and persistent price uncertainty reinforces this stance.' She noted that a premature hike could further weaken demand, while elevated inflation makes a rate cut difficult to justify.
Contrasting View: Rate Cut Expected
Aliyu Ilias, an economist and development expert, predicts the CBN will cut the MPR by at least 50 basis points. He argued that improving macroeconomic stability allows for easing, and sustaining high interest rates sacrifices growth. 'The MPC meeting is expected to cut the MPR by at least 50 basis points, this is because there is a gradual easing and we cannot continue to sacrifice growth to reduce inflation, it appears counterproductive,' he said. Ilias expressed concern about high borrowing costs on businesses, especially manufacturers and MSMEs, saying higher rates could weaken these sectors. 'Industry, manufacturing sector, and MSMEs are weakened with this handling of MPR,' he said.
