MPC plays it safe: Cardoso adopts caution in Nigeria’s disinflation, stabilisation fight  

Omeiza Bilal

The Central Bank, at its 305th Monetary Policy Committee meeting on Wednesday, unanimously voted to halt the bench mark interest rate (MPR) steady at 26.5%.

The cautious, orthodox approach adopted to prioritizes ongoing disinflation efforts and stabilizing the Naira over cutting borrowing costs for businesses and citizens. This is as results of marginal increases in headline inflation which stood 15.69% in April, following the disruptions in global energy and supply due to the crisis in Middle East region.

Governor Olayemi Cardoso confirmed that the eleven-member committee resolved to retain the MPR at 26.50%, the Cash Reserve Ratio at 45.00% for Deposit Money Banks and 16.00% for Merchant Banks, the CRR on non-TSA public sector deposits at 75.00%, the Liquidity Ratio at 30.00%, and the asymmetric corridor at +50/-450 basis points around the MPR. 

The Governor noted that the rise in March and April 2026 inflation as a short-cycle blip to external shocks rather than a renewed structural trend, and affirmed that macroeconomic environment robust enough to support a resumption of disinflation efforts.

What informed the hold? 

The MPC particularly noted and highlighted the Middle East crises, which have put upward pressure on energy prices, cost of transportation, and other logistics.

However, available evidence indicates that the impact of the crisis on the Nigerian economy has been largely insignificant due to the various policy reforms by both fiscal and monetary sides of economic, which include: exchange rate stability; improved external reserve buffers; strengthened monetary policy transmission; well-capitalized banking system; ongoing fiscal consolidation- which have significantly bolstered the economy’s ability to absorb unforseen shocks.

The uncertainty caused by pass-through of global commodity and energy price shocks to domestic inflation has been significantly mitigated and would have been more severe in the absence of these reforms.

External buffers: Reserves hit $50bn

Cardoso disclosed that the nation’s Foreign Reserves stood at $49.49 billion, nearing the pre-Middle East crisis period level. 

He expressed optimism that the reserves with the capacity to accommodate nine months of import would bolster investor confidence in the Nigerian economy, which he described as having a positive outlook expected to remain resilient.

“The Monetary Policy Committee therefore, is convinced that the essential conditions for price stability remain firmly in place” the communique read.

Last week, ahead of the Monetary Policy Committee meeting, the Centre for the Promotion of Private Enterprise (CPPE) had cautioned the Central Bank of Nigeria (CBN) against excessive monetary tightening ahead of the 305th meeting.

According to CPPE, higher interest rates could weaken economic growth, private-sector investment, industrial productivity, and employment.

The think-tank also raised concerns over increasing liquidity injections linked to political activities ahead of the 2027 general elections, warning that rising political spending and increased Federation Account Allocation Committee (FAAC) disbursements to states and Local Governments could worsen inflationary pressures. 

With the freezing of the MPR, the fears and concerns of the experts have been taken care of, as the focus of the committee is to pursue disinflation and stabilize the Naira.

GDP growth and mixed inflation triggers

Documents show improvements in non-oil exports, GDP growth and other factors also influenced MPC’s decision.

Headline inflation (year-on-year) rose marginally for the second consecutive month to 15.69 per cent in April 2026, from 15.38 per cent in the preceding month, largely driven by an increase in the food component. Food inflation rose to 16.06 per cent in April 2026 from 14.31 per cent in March, reflecting the high cost of transportation and other logistics, as well as seasonal factors.

“Core inflation, however, moderated to 15.86 per cent in April 2026, from 16.21 per cent in March. Similarly, the 12-month average inflation slowed to 19.16 per cent in April 2026, from 20.05 per cent in March, marking the sixth month of consecutive decline.

Month‑on‑month headline inflation also eased to 2.13 per cent in April 2026, compared with 4.18 per cent in March 2026, reflecting moderation in both food and core components.

“Real GDP grew by 4.07 per cent in the fourth quarter of 2025, compared with 3.98 per cent in the preceding quarter, supported by expansion in industry and agriculture sectors. The non-oil sector grew by 3.99 per cent (year-on-year) in Q4 2025 from 3.91 per cent in the preceding quarter, driven by key activities in the Services sector including information & communication, and transportation & storage activities.

“Growth in the oil sector also increased to 6.79 per cent in Q4 2025 from 5.84 per cent in the previous quarter, on the back of improved refining in the downstream sector,” the report stated.

Available projections indicate a moderate near-term increase in inflation. However, the combined effects of previous policy tightening, exchange rate stability coupled with enhanced food supply are expected to support the return to disinflation. 

In light of emerging domestic and global uncertainties, the Committee reaffirmed its commitment to a forward-looking and evidence-based policy framework, anchored in its primary mandate of achieving price stability while preserving the healthy and resilience of the financial system of the country’s economy.