Naira holds steady after CBN retains interest rate at 26.5%

The naira traded almost flat against the dollar in the official foreign exchange (FX) market on the same day the Central Bank of Nigeria (CBN) retained its benchmark Monetary Policy Rate (MPR) at 26.5 percent.

Data from the CBN showed that the naira appreciated marginally by 53 kobo, with the dollar quoted at N1,373.34 on Wednesday compared to N1,373.87 on Tuesday at the Nigerian Foreign Exchange Market (NFEM).

Turnover at the NFEM window declined by 18.65 percent to $286.03 million on Tuesday, representing a drop of $65.57 million from $351.60 million recorded the previous day. The number of deals at the NFEM remained the same at 261.

In the interbank segment, the number of deals rose by 47.37 percent from 76 transactions on Tuesday to 112 on Wednesday. However, total interbank turnover dipped slightly by 6.08 percent to $68.02 million, down from $72.42 million recorded a day earlier.

Read also: CPPE backs CBN’s move to hold policy rates

At the parallel market, also known as the black market, the naira weakened by N5 to close at N1,395 per dollar on Wednesday, compared to N1,390 on Tuesday. This widened the gap between the official and parallel market rates to N22 per dollar from N17 recorded earlier in the week.

Following the conclusion of its two-day Monetary Policy Committee (MPC) meeting on Wednesday, the CBN voted to retain all key monetary policy parameters unchanged, reaffirming its commitment to price stability and long-term economic sustainability.

The apex bank retained the MPR at 26.5 percent, while the asymmetric corridor around the MPR was left unchanged at +50/-450 basis points.

The Cash Reserve Ratio (CRR) for Deposit Money Banks was maintained at 45 percent, while the CRR for Merchant Banks remained at 16 percent. The liquidity ratio was also retained at 75 percent.

Speaking at a post-MPC briefing, Olayemi Cardoso, governor of the CBN, said Nigeria’s gross external reserves increased to $49.49 billion as of May 15, 2026, from $48.35 billion at the end of March.

According to him, the reserve level provides more than nine months of import cover, strengthening the country’s external buffer amid ongoing reforms in the foreign exchange market.

Cardoso, governor of the CBN, who announced the outcome of the meeting on Wednesday, said the committee’s decision was anchored on a comprehensive assessment of domestic and global risks, particularly rising geopolitical tensions in the Middle East, which have triggered renewed pressure on energy prices, transportation costs, and global supply chains.

Despite inflation rising for a second consecutive month, the MPC described the pressure as largely transitory and expressed confidence that the current macroeconomic environment remains sufficiently robust to support a return to disinflation.

“Available evidence indicates that the impact of the crisis on the Nigerian economy has been largely muted due to the benefits of prior policy reforms,” Cardoso said.

Razia Khan, managing director and chief economist for Africa and the Middle East Global Research at Standard Chartered Bank, said the CBN’s decision to hold rates came as little surprise to the market, with policymakers leaving all monetary parameters unchanged. Eight economists earlier polled by BusinessDay recommended a hold.

“Few surprises in the actual decision, with the CBN opting to hold all parameters, including the MPR at 26.5 percent, the corridor at +50/-450 basis points, and the CRR unchanged,” she said.

According to Khan, the key message from the Monetary Policy Committee was its belief that recent inflationary pressures would prove temporary and that disinflation would soon resume.

“The big takeaway was that the CBN expects any near-term price pressures to be transient, with disinflation soon returning,” she said.

However, she expressed concerns about the inflation outlook and the possibility of rising fiscal pressures ahead of the election cycle.

“We are less convinced. We’re not sure inflation expectations are well-anchored. Fiscal policy in the run-up to the election could be a problem,” Khan noted.

She added that despite these concerns, the CBN is not currently signalling an immediate need for further monetary tightening ahead of its next MPC meeting scheduled for July 21.

“Still, with the next MPC meeting scheduled for July 21, the CBN is not currently indicating any need to tighten,” she said.

According to the MPC, reforms including exchange rate stabilisation, stronger external reserve buffers, improved monetary policy transmission, banking sector recapitalisation, and ongoing fiscal consolidation have significantly enhanced the economy’s shock absorption capacity.

The committee noted that without these reforms, the pass-through effect of global commodity and energy price increases on domestic inflation would have been far more severe.

Nigeria’s headline inflation rate rose to 15.69 percent in April 2026 from 15.38 percent in March, driven mainly by higher food prices and logistics costs, according to the National Bureau of Statistics.

Cardoso said the committee adopted a cautious stance amid persistent global uncertainties and evolving external risks.

Analysts said the decision reflects the Central Bank’s attempt to preserve investor confidence, sustain exchange rate stability, and avoid undermining foreign portfolio inflows at a time when major global central banks, including the US Federal Reserve, Bank of England, and European Central Bank, are also maintaining tight monetary conditions.

Bismarck Rewane, managing director of Financial Derivatives Company, said inflation could rise toward 16.5 percent in the coming months due to global tensions and elevated energy prices, but argued that Nigeria’s macroeconomic position has improved significantly.

“Nigeria is in a stronger position to have a stable, predictable and well-managed exchange rate,” he said on CNBC, citing stronger reserves, improved oil prices, and reforms implemented by the current administration and the Central Bank.

The committee also welcomed a recent sovereign rating upgrade by S&P, describing it as evidence of improving macroeconomic fundamentals and strengthening policy credibility. It added that Nigeria’s reform trajectory continues to support investor confidence despite global headwinds.

Members further noted the successful completion of the banking sector recapitalisation exercise, which produced 33 stronger banks with improved balance sheet resilience. They urged the CBN to remain vigilant in addressing any post-recapitalisation risks to preserve financial stability.