As the Monetary Policy Committee (MPC) of the Central Bank of Nigeria (CBN) kicks off its first meeting of 2026 today, financial analysts are predicting a decisive shift toward a dovish stance.
The optimistic outlook is fueled by a surprise moderation in headline inflation, which cooled to 15.1% in January 2026, down from 15.2% in December, and the Naira’s sustained 8% appreciation against the dollar since the start of the year.
The Case for Easing: Inflation vs. Exchange Rate
Nigeria’s disinflation trend has gained significant momentum, defying earlier market projections of 19.5%.
Analysts at Cordros Research and FXTM suggest that the worst of the inflation cycle is now in the rearview mirror, providing the apex bank with the necessary room to recalibrate its aggressive tightening cycle.
Key Economic Indicators (Jan 2026):
- Headline Inflation: 15.1% (Year-on-Year)
- Naira Performance: ~8% appreciation YTD
- Lending Rates: Average maximum lending rate dropped to 29.32% in Dec 2025.
Policy Parameter |
Current Rate |
Projected Adjustment |
| Monetary Policy Rate (MPR) | 27.00% | 26.00% (-100bps) |
| CRR (Deposit Money Banks) | 45.00% | Retain at 45.00% |
| Asymmetric Corridor | +50/-450bps | +200/-300bps |
| Liquidity Ratio | 30.00% | Retain at 30.00% |
Analyst Perspectives: A Cautious Calibrated Cut
While the case for easing is strong, experts warn that the CBN will likely avoid a “shock” reduction to prevent reigniting price pressures.
Ayokunle Olubunmi, head of Financial Institutions Ratings at Agusto & Co., expects a maximum cut of 100 basis points.
“Even if there are adjustments to the Cash Reserve Ratio (CRR), it will likely be minor,” he noted, citing the need to balance growth support with liquidity control as government capital spending ramps up.
Lukman Otunuga, Senior Market Analyst at FXTM, highlighted that the unexpected dip in food prices has been a primary driver of the disinflation trend, reinforcing the argument for a rate reduction to stimulate the real sector.
The CBN appears to have reached an inflection point. After nearly two years of aggressive interest rate hikes that pushed borrowing costs to record highs, the tight money era is cooling.
A 100bps cut would signal to the markets that the CBN is gaining confidence in its currency stability measures and its new CPI series.
However, the real test will be the transmission mechanism. While the MPC may cut the MPR, businesses on the ground will be watching to see if commercial banks follow suit by lowering the 29.3% average lending rate, or if they will maintain high margins to protect their own liquidity buffers amidst the ongoing 2026 recapitalization exercise.
[Part of publication sourced from ThisDay]
