The Central Bank of Nigeria (CBN) has decided to maintain the Monetary Policy Rate (MPR) at 26.5 percent despite an upward trend in inflation. Governor Yemi Cardoso, speaking after a two-day meeting, defended the decision, stating that recent inflationary pressures are temporary and largely driven by external shocks rather than domestic policy failures.
Key Monetary Parameters Unchanged
The Monetary Policy Committee (MPC) voted unanimously to keep the MPR at 26.5 percent. Additionally, the cash reserve ratio (CRR) for deposit money banks remains at 45 percent, while merchant banks retain a CRR of 16 percent. The asymmetric corridor around the MPR is unchanged at +500/-100 basis points, and the CRR on non-TSA public sector deposits stays at 75 percent.
Confidence in Economic Resilience
Cardoso emphasized that the economy remains resilient despite global uncertainties, particularly geopolitical tensions in the Middle East that have increased energy and transportation costs. He noted that Nigeria's recent reforms have insulated the economy from the full impact of these shocks, citing improved exchange rate stability, stronger foreign reserves, tighter monetary transmission, banking sector reforms, and ongoing fiscal consolidation.
He stated: "Although inflation has risen marginally for two consecutive months, largely induced by external shocks, the MPC recognized its transitory nature and remained confident that the current macroeconomic environment is sufficiently robust to support a return to disinflation."
Inflation Trends and Policy Outlook
Headline inflation rose to 15.69 percent in April 2026 from 15.38 percent in March, while food inflation climbed sharply to 16.06 percent from 14.31 percent, driven by transportation and logistics costs as well as seasonal supply pressures. Cardoso stressed the CBN's commitment to sustaining the current policy direction, noting that the economy had recorded 11 consecutive months of disinflation before the recent uptick. He added: "We will sustain the course. We have seen that, by adopting the right policies, we have consistently been on a path of disinflation. This, we believe, is temporary."
Foreign Exchange Market Reforms
The CBN governor reiterated the apex bank's commitment to exchange rate stability, describing forex market reforms over the past two years as critical to rebuilding investor confidence. Daily foreign exchange market turnover has risen dramatically from about $100 million at the start of the current administration to as high as $1 billion on some trading days, reflecting improved liquidity and transparency. Cardoso emphasized that the central bank's interventions accounted for only about 1.2 to 1.3 percent of total market turnover in 2025, indicating a self-sustaining market under the willing-buyer willing-seller framework.
External Reserves and Credit Rating
Nigeria's external reserves rose to $49.49 billion as of May 15, 2026, from $48.35 billion at the end of March, enough to cover more than nine months of imports. Cardoso noted that the recent sovereign credit rating upgrade validated the government's reform agenda and reinforced international confidence in Nigeria's macroeconomic management.
Banking Recapitalisation and SME Lending
Cardoso welcomed the successful completion of the banking recapitalisation exercise, with 33 banks meeting new capital requirements. He described the exercise as evidence of growing investor confidence, revealing that domestic investors accounted for roughly 74 percent of total capital raised. He acknowledged that a few banks faced legal and regulatory issues, which the CBN is addressing. Fresh credit to small and medium enterprises (SMEs) increased to about N199 billion in April from N153 billion in March, driven largely by retail and short-term facilities.
Consumer Protection and Bank Charges
In response to allegations of excessive bank charges, Cardoso defended the banking industry, insisting that stamp duty collections are statutory taxes imposed by tax authorities, not banks. He acknowledged growing public dissatisfaction with transaction alerts and multiple debit notifications, disclosing that the CBN has established consumer protection and market conduct frameworks to address complaints and improve banking service standards.
