CBN holds interest rate at 26.5% as Olayemi Cardoso rejects intervention policies, warns on inflation risks

The Central Bank of Nigeria (CBN) has maintained its benchmark interest rate at 26.5 per cent, reinforcing its cautious approach to inflation control and macroeconomic stability amid renewed economic pressures.

The decision was reached during the 305th meeting of the Monetary Policy Committee (MPC), where policymakers opted to hold all major monetary parameters steady despite mounting debates over inflation, exchange-rate stability and the future direction of Nigeria’s economic reforms.

CBN Governor Olayemi Cardoso also used the opportunity to defend the apex bank’s return to orthodox monetary policy, warning against renewed calls for intervention programmes that previously weakened monetary policy effectiveness and distorted the institution’s balance sheet.

The latest move comes as Nigeria faces lingering inflation concerns, pressure on consumer purchasing power and heightened uncertainty from global geopolitical developments.

MPC Holds Key Monetary Parameters Steady

At the conclusion of the MPC meeting, the committee retained the Monetary Policy Rate at 26.5 per cent, while leaving other monetary indicators unchanged.

The asymmetric corridor around the MPR remained at +50 and -450 basis points, while the Cash Reserve Ratio stayed at 45 per cent for deposit money banks and 16 per cent for merchant banks.

According to analysts, the MPC’s decision reflects a strategy of caution as policymakers attempt to balance inflation control with economic growth.

Headline inflation rose for the second consecutive month to 15.69 per cent in April 2026 from 15.38 per cent in March, while food inflation climbed sharply to 16.06 per cent from 14.31 per cent.

The committee linked the inflationary increase largely to higher transportation and logistics costs caused by geopolitical tensions in the Middle East, which affected global energy prices and domestic supply chains.

Despite the uptick, the MPC maintained that the inflation pressure was temporary rather than structural.

Cardoso Rejects Return to CBN Intervention Programmes

Speaking during the opening session of the MPC workshop in Abuja, Cardoso defended the apex bank’s policy reforms and warned against a return to interventionist programmes.

According to the CBN governor, previous intervention schemes weakened institutional credibility, blurred fiscal and monetary responsibilities and reduced transparency within the financial system.

He said the apex bank was now focused on orthodox monetary policy, transparency and evidence-based decision-making to restore investor confidence and strengthen macroeconomic stability.

Cardoso noted that reforms introduced under the current administration had improved liquidity management, strengthened policy communication and enhanced transparency in the foreign exchange market.

The governor added that the economy had become more resilient to external shocks due to ongoing reforms and improved coordination between fiscal and monetary authorities.

External Reserves and Exchange-Rate Stability Support Confidence

The MPC highlighted Nigeria’s improving external reserves and exchange-rate stability as major indicators supporting the current policy direction.

External reserves reportedly rose to $49.49 billion as of May 15, 2026, compared to $48.35 billion at the end of March, providing more than nine months of import cover.

The naira has also maintained relative stability in recent months, helping to moderate imported inflation and reduce market volatility.

Economic growth figures also strengthened the committee’s confidence. Nigeria’s GDP reportedly expanded by 4.07 per cent in the fourth quarter of 2025, driven by growth in both oil and non-oil sectors.

The recent upgrade by S&P Global further reinforced optimism surrounding Nigeria’s macroeconomic reforms and financial outlook.

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Economists Divided Over MPC’s Decision

Economic experts remain divided over whether the CBN has done enough to tame inflation or whether earlier policy easing may have come too soon.

Vice Chairman of Highcap Securities, , said he had expected the MPC to raise interest rates slightly in response to the recent inflation increase.

According to him, the committee’s decision to maintain current monetary aggregates suggests it remains focused on supporting economic growth despite inflation concerns.

Meanwhile, the Centre for the Promotion of Private Enterprise described the MPC’s stance as a sign of “policy maturity and strategic restraint.”

The group argued that Nigeria’s inflation crisis is largely supply-driven rather than demand-induced, noting that tighter monetary policy alone cannot resolve food shortages, insecurity, transport bottlenecks or global energy shocks.

Concerns Persist Over Inflation Data and Monetary Transmission

However, some economists questioned the credibility of Nigeria’s inflation measurement framework and the effectiveness of the country’s monetary transmission system.

Executive Chairman of the Society for Analytical Economics, , argued that key economic variables such as inflation, exchange rates and interest rates are built on weak statistical foundations.

He warned that insufficient transparency and incomplete financial disclosures could undermine the reliability of monetary policy projections.

Owoh also questioned whether the benchmark interest rate effectively influences borrowing costs and investment decisions within Nigeria’s economy.

According to him, persistent opacity in fiscal operations has weakened the relationship between policy rates and actual credit conditions.

Banking Sector Recapitalisation Gains Attention

The MPC also praised the recently concluded banking recapitalisation exercise, which reportedly injected N4.65 trillion into the economy.

Cardoso described the exercise as evidence of effective policy coordination and strong financial sector supervision.

The committee noted that recapitalisation had strengthened financial soundness indicators across Nigerian banks without triggering panic or depositor anxiety.

Still, some economists argued that the actual economic impact of the exercise remains unclear without details regarding implementation costs and funding sources.

Analysts Watch July MPC Meeting Closely

Attention is now shifting to the next MPC meeting scheduled for July 21 and 22, where policymakers are expected to reassess inflation trends, exchange-rate stability and liquidity conditions.

Analysts say the committee could consider further tightening if inflation continues to rise in the coming months.

Others believe stable inflation and improved food supply during the harvest season may create room for gradual policy easing later in the year.

For now, the CBN appears committed to maintaining its cautious stance while prioritising macroeconomic stability, inflation moderation and investor confidence.

FAQ

Why did the CBN retain the interest rate at 26.5%?

The CBN retained the Monetary Policy Rate at 26.5% to balance inflation control with economic growth. Policymakers believe maintaining current rates will help stabilize prices without putting additional pressure on businesses and consumers.

What is the Monetary Policy Rate (MPR)?

The Monetary Policy Rate is the benchmark interest rate set by the Central Bank of Nigeria. It influences lending rates, borrowing costs, inflation and overall economic activity.

What did Olayemi Cardoso say about intervention programmes?

CBN Governor Olayemi Cardoso warned against returning to interventionist programmes, saying they weakened policy credibility, distorted the apex bank’s balance sheet and reduced transparency.

Why is inflation rising in Nigeria again?

The MPC linked rising inflation to increased transportation and logistics costs caused by geopolitical tensions in the Middle East, which pushed up global energy prices and affected supply chains.

How does high interest rate affect Nigerians?

High interest rates increase borrowing costs for individuals and businesses, making loans more expensive. However, they can also help reduce inflation by limiting excess money supply in the economy.

Is the naira stable in 2026?

According to the CBN, the naira has remained relatively stable due to improved foreign exchange management, stronger external reserves and ongoing economic reforms.

What is orthodox monetary policy?

Orthodox monetary policy refers to the use of conventional tools such as interest rates, liquidity management and reserve requirements to manage inflation and stabilize the economy.

Will the CBN increase interest rates again?

Analysts say the next MPC decision will depend largely on inflation trends. If inflation continues to rise, the CBN may consider another rate hike during upcoming meetings.

How does inflation affect businesses in Nigeria?

Rising inflation increases operating costs, reduces consumer purchasing power and affects profit margins. Businesses often struggle with higher transportation, energy and production expenses during inflationary periods.

What is the significance of Nigeria’s banking recapitalisation exercise?

The recapitalisation exercise reportedly injected N4.65 trillion into the economy and strengthened the financial sector, improving banks’ resilience and ability to support economic growth.