Nigeria Caps Interest Rate at 26.5%

Nigeria’s Central Bank has kept its benchmark interest rate unchanged at 26.50%, maintaining a cautious monetary policy stance amid renewed global uncertainty and concerns that geopolitical tensions could trigger fresh inflationary pressures.

The Monetary Policy Committee (MPC) left the rate unchanged for a second consecutive meeting, a decision that was widely anticipated by financial markets. Although Nigeria’s headline inflation eased to 15.91% in June, Central Bank Governor Olayemi Cardoso said the recent escalation of hostilities between the United States and Iran could disrupt global energy markets and push oil prices higher, with possible implications for domestic inflation.

Cardoso said the committee considered it necessary to retain its current policy stance to safeguard macroeconomic stability and ensure that inflation continues on a downward path. He noted that while recent inflation data showed encouraging signs, external risks remained significant and required careful monitoring before any adjustment to interest rates could be considered.

Market analysts said the decision is expected to sustain tight liquidity conditions and preserve attractive yields on government securities, helping to support investor confidence in naira-denominated assets. Some economists, however, believe inflation may be approaching its peak and have suggested that the Central Bank could begin easing monetary policy later in the year if inflation continues to decline and external risks subside.

The MPC said it would continue to monitor domestic and global economic developments before making further policy decisions, stressing that maintaining price stability remains its primary objective.

SOURCE: Reuters