CBN’s MPC retains key policy rate, citing renewed U.S.-Iran hostilities

Nigeria’s central bank kept its monetary policy rate unchanged at ‌26.50% on Tuesday, saying a cautious approach was needed given renewed fighting between the U.S. and Iran in recent weeks.

The CBN said that Nigeria’s headline inflation rate eased marginally to 15.91% in June 2026 from 15.93% in May, indicating a slight moderation in overall price pressures.

Food inflation accelerated to 3.75% on a monthly basis in June from 2.98% in May, pointing to renewed pressure on food prices.

The Cash Reserve Ratio was retained at 45% for commercial banks and 16% for merchant banks.

The Standing Facilities Corridor remained at +50/-450 basis points around the MPR. The CRR on non-TSA public sector deposits was retained at 75%.

“Global uncertainties have heightened due mainly to the renewed hostilities in the Middle East,” Governor Cardoso said. “In view of the evolving developments, maintaining a cautious policy stance remains appropriate.”

The decision to retain the MPR at 26.5% means the CBN has kept its benchmark interest rate unchanged as it continues to balance the need to control inflation with efforts to support economic activity.

The Monetary Policy Rate serves as the benchmark interest rate used by the CBN to influence lending rates, liquidity conditions, inflation and overall macroeconomic stability.

Higher interest rates generally increase borrowing costs for businesses and consumers but may help moderate inflationary pressures.

Headline inflation was marginally lower at 15.91% year on year in June, but price pressure could build again after the resumption of conflict in the Middle East in early July sent global oil prices sharply higher.

“Although the headline inflation moderated marginally in June 2026, global uncertainties have heightened due mainly to the renewed hostilities in the Middle East,” Governor Olayemi Cardoso told a press conference.

“Maintaining ‌a cautious monetary policy stance remains appropriate,” he continued.

Robert Omotunde, director and chief investment officer at MDU Capital Limited, said the policy decision would keep liquidity conditions tight and support relatively high fixed-income yields.

“This environment should continue to support investor appetite for government securities, preserve attractive real returns on fixed-income instruments as inflation moderates, and reinforce the attractiveness of naira-denominated assets to both domestic and offshore investors,” he added.

Capital Economics analyst David Omojomolo said in a research note that he thought inflation was close to its peak and this should give the central bank confidence to cut interest rates from September.