Analyst forecasts MPC to hold rate at 26.50% as inflation moderates

The Monetary Policy Committee of the Central Bank of Nigeria is expected to hold its benchmark interest rate at 26.50 per cent at its upcoming meeting on 20 and 21 July 2026. Meristem Research, in its latest macroeconomic preview report released on Friday, 17 July 2026, said the committee will likely prioritise macroeconomic stability over further tightening or premature easing.

Nigeria's headline inflation recorded its first marginal decline in three months, dropping to 15.91 per cent in June 2026. Core inflation softened due to lower domestic transport costs, but food inflation extended its upward trajectory to 17.52 per cent, signalling that supply-side pressures remain strong.

Why a hold makes sense

According to Meristem, this delicate economic balancing act makes a hold decision the most rational path forward for the committee. “On a balance of factors, we expect the MPC to retain all policy parameters at current levels, allowing the impact of earlier policy actions to continue filtering through the economy while it assesses the implications of renewed global energy risks and the sustainability of the recent moderation in inflation,” Meristem stated.

External factors are heavily shifting the macroeconomic landscape. A brief geopolitical truce in June initially pulled Brent crude prices down to around $72 per barrel. But renewed hostilities in the Middle East and rising tensions around the Strait of Hormuz have pushed oil back above $85 per barrel, threatening a new wave of imported inflation.

Major central banks worldwide have responded with a hawkish pause or outright tightening. The US Federal Reserve and the Bank of England held their policy rates steady. The European Central Bank executed a 25-basis points rate increase at its June meeting to curb persistent underlying inflation.

Domestic growth and fiscal strain

Meristem’s analysts noted that keeping domestic rates restrictive is crucial to maintaining Nigeria’s competitive advantage. “Keeping rates unchanged would help contain inflationary pressures and preserve Nigeria’s interest rate differential amid a still-tight global monetary environment,” they said.

Domestically, Nigeria’s economy is showing signs of moderate growth. The CBN Composite PMI rose slightly to 50.10 points in June, signalling a return to private sector expansion. The oil sector achieved a major milestone, with crude oil production improving to 1.53 million barrels per day, exceeding Nigeria’s OPEC quota for the first time in ten months.

However, the fiscal side remains heavily strained. The Federal Government continues to rely heavily on debt markets, with 2026 debt service obligations budgeted at N15.81tn. Meristem said a rate cut would diminish investor demand for government securities, while a rate hike would worsen the state’s borrowing costs.

Evaluating the monetary and fixed-income dynamics, the firm concluded, “We believe a reduction in the MPR would send a conflicting policy signal. With the government’s domestic borrowing programme set to remain elevated through Q3 2026, maintaining relatively attractive yields will be key to sustaining investor demand at primary market auctions.”

The MPC is also expected to retain the liquidity ratio at 30.00 per cent and the Cash Reserve Ratio at 45.00 per cent for Deposit Money Banks.

For Nigerian businesses and consumers, a hold decision signals that borrowing costs will remain elevated in the near term. This means loan repayments stay high, but it also keeps the naira attractive to foreign investors seeking yield, which could help stabilise the currency.