Cardoso says inflation path delayed, not derailed by new shocks

…As CBN holds MPR at 26.5% for second straight meeting after february cut

The Central Bank of Nigeria (CBN) kept its benchmark interest rate unchanged at 26.5% for the second consecutive meeting on Tuesday, as Governor Olayemi Cardoso said unexpected shocks had slowed the country’s disinflation journey but had not undermined the long-term goal of returning inflation to single digits.

Briefing journalists in Abuja after the Monetary Policy Committee (MPC) concluded its two-day meeting, Cardoso said the decision to maintain the Monetary Policy Rate (MPR), alongside other policy parameters, reflected a cautious approach aimed at containing inflation risks while supporting economic stability.

“Given elevated global uncertainty and domestic inflation dynamics, a steady policy stance allows us to monitor incoming data and act if conditions warrant,” Cardoso said.

The MPC retained the MPR at 26.5%, the standing facilities corridor at +50/-450 basis points around the benchmark rate, and cash reserve requirements at 45% for deposit money banks, 16% for merchant banks and 75% for non-Treasury Single Account public sector deposits.

Cardoso said the decision came against the backdrop of renewed global uncertainties, including geopolitical tensions that have heightened risks around energy prices, commodity costs and supply chains.

He said Nigeria’s inflation trajectory had been disrupted by shocks that lasted longer than policymakers initially anticipated, after a period of sustained moderation.

“Eleven months of disinflation, and quite frankly, from every indication, we were expecting that by early 2027, we would be where we want to be in terms of inflation and firmly on track for single digits,” he said.
“Unfortunately, these were shocks that came that were not anticipated in that manner, and have gone on a lot longer than could have been anticipated.”

The governor, however, said recent moderation in inflation showed that monetary policy measures were beginning to take effect.
“We are pleased, however, on two counts. One is the fact that inflation has moderated. Albeit slightly, it has moderated,” Cardoso said. “Headline inflation has moderated, so that gives us an indication that the tools we have implemented so far are bearing effect.”

Read also: CBN’s rate hold reinforces inflation fight despite easing price pressures

Official data showed headline inflation eased marginally to 15.91% year-on-year in June from 15.93% in May, ending a three-month period of increases. Core inflation also slowed to 15.92% from 16.82%, supported by relative stability in the foreign exchange market. However, food inflation accelerated to 17.52% from 16.96%, reflecting supply constraints and higher transportation costs.

Cardoso said fiscal and monetary authorities would deepen coordination to tackle structural pressures affecting prices.
“There are rigidities that really and truly hit you from different sides. Collaboration between the fiscal and monetary authorities at a time like this cannot be overemphasised,” he said.

The MPC said the economy continued to show resilience, supported mainly by non-oil sectors. Real gross domestic product expanded 3.89% in the first quarter of 2026, compared with 4.07% in the previous quarter, with telecommunications, finance, trade and transport among the major contributors.

The oil sector, however, slowed sharply, growing 2.57% in the first quarter compared with 6.79% in the fourth quarter of 2025, due to maintenance-related disruptions.

The committee also noted improved external buffers, with gross foreign reserves rising to $52.52 billion by mid-July from $50.47 billion at the end of May. Cardoso said the reserve position provided adequate cover for imports and reflected improving confidence in Nigeria’s reforms.

On the naira exchange rate, the governor said the CBN would continue to support a transparent, liquid market driven by willing buyers and sellers, rather than targeting a specific exchange rate level.
“Our view is one of continuing on the path that we have embarked upon, and that is to ensure that we have a market that is transparent, liquid, and based on a willing buyer, willing seller framework,” he said.

Cardoso added that the exchange rate would ultimately be determined by economic fundamentals, including oil and non-oil exports, foreign direct investment and domestic productivity.

The governor also defended the recent decline in bank lending, saying the moderation reflected a transition towards a healthier credit environment rather than weakness in the banking sector.

He said the removal of pandemic-era forbearance measures had prompted banks to reassess their loan portfolios.
“Forbearance had outlived its time. We are now in 2026, and really and truly, we did not see any reason why it should continue to form part of the banking system’s balance sheet,” Cardoso said.

He said lending would recover as banks strengthen their capital positions following the recapitalisation exercise.
The governor described the banking recapitalisation programme as a major success, noting that 33 out of 37 banks met the required capital thresholds without an extension of the deadline.

“Being able to recapitalise without extending the deadline, with 33 out of the 37 banks meeting the threshold we had set, is something that is very commendable,” he said.

Cardoso said the exercise had strengthened the financial system, with much of the capital raised coming from domestic investors.

The CBN governor also addressed the future of Nigeria’s payment system, saying demand for lower denomination banknotes would continue to decline as digital payments and financial inclusion expand.

“The world is moving in a particular direction, and we will not be left behind,” he said, pointing to increased use of digital payment channels globally.

Looking ahead, the MPC warned that global growth prospects remained fragile, with inflation risks tilted upward due to commodity price pressures, supply disruptions and climate-related challenges.

Cardoso also used the briefing to reflect on the CBN’s recognition as the Central Bank of the Year for 2026, saying the award was not a personal achievement but a recognition of the work of the institution’s staff and management.

He said the recognition reflected the difficult reforms undertaken by the bank in recent years, including efforts to restore stability, improve transparency and strengthen the financial system.

He said the central bank remained committed to restoring price stability, strengthening the financial system and creating the conditions for sustainable growth.

“We are not an island,” he said. “All the very difficult and painful reforms we have made have been tracked by those whose duty it is to do so. They can see that those reforms have taken us on a journey that is paying off for Nigeria.”