Central Bank of Nigeria (CBN) decision to retain the benchmark interest rate and other parameters at its yesterday’s monetary policy review would further strengthen Nigeria’s macroeconomic stability and growth, Finance and economy experts have said.
They said the apex bank acted in favour of stability and balanced consideration for fiscal objectives, a decision they noted, showed courage and maturity in unfolding monetary phase.
The Nation hinted on possible retention of all policy parameters in a report published yesterday on its Business page.
At the close of its two-day meeting in Abuja, the bank announced the retention of interest rate at 26.5 per cent.
Yesterday’s was the 306th meeting of the Monetary Policy Committee (MPC).
It also left the Standing Facilities Corridor unchanged at +50 and -450 basis points around the MPR. Cash Reserve Ratio (CRR) was retained at 45 per cent for Deposit Money Banks, 16 per cent for merchant banks and 75 per cent for non-Treasury Single Account (TSA) public sector deposits. Liquidity Ratio was held at 30.0 per cent.
Managing Director, HighCap Securities, Mr David Adonri, said the decision underlined the country’s macroeconomic stability.
He said: ‘The country’s macroeconomic condition is stable. Inflation is practically at a standstill although there are threats of spike due to rising domestic cost of energy and insecurity. Retention of monetary aggregates is wise especially when policy target to drive inflation rate to single digit has not materialized.’
Adonri said the retention would also anchor stability in the financial system.
He however noted that while the economy is apparently responding positively to demand management policies, there is need for enhanced and well-calculated supply side measures to further facilitate growth.
Experts at FSDH Group said the decision of the apex bank was a positive signal to the economy as it sought to sustain the moderation in inflation, stabilise the foreign exchange market and consolidate recent macroeconomic gains.
According to them, maintaining the current policy rate would help anchor inflation expectations, preserve positive real returns, support exchange rate stability and allow earlier policy actions to continue transmitting through the economy.
At Skyview Capital, analysts stated that the CBN’s policy stance reflected broad view on sustainability, while simultaneously being considerate of possible macroeconomic developments.
CBN Governor and MPC Chairman Olayemi Cardoso told reporters after the two-day meeting that the committee decided to leave all key monetary policy parameters unchanged after carefully reviewing developments in both the domestic and global economy.
According to him, the committee’s decision to maintain the current policy stand follows a thorough assessment of the balance of risk.
He noted that although headline inflation moderated marginally in June 2026, global uncertainties have heightened due mainly to the renewed hostilities in the Middle East.
Cardoso said while Nigeria’s economy has continued to show resilience following recent structural reforms, worsening geopolitical situation in the Middle East poses fresh risks to global energy prices and could increase inflationary pressures at home.
He, however, pointed out that despite these concerns, the CBN has continued to make progress in reducing inflation, with the country recording 11 consecutive months of disinflation.
He noted that before the recent global shocks, the apex bank had expected inflation to remain on course towards its desired level by early 2027, creating a pathway to single-digit inflation.
The CBN boss said: ‘We recorded 11 consecutive months of disinflation and, from every indication, we expected that by early 2027 we would be where we wanted to be in terms of inflation, with a path towards single-digit inflation.’
Cardoso explained that unforeseen global developments, especially rising energy prices linked to international conflicts, have slowed that progress.
‘Unfortunately, we have experienced external shocks that were not anticipated and have lasted much longer than anyone expected. At this stage, nobody knows exactly how long they will persist,’ Cardoso said.
He said the slight moderation in inflation shows that the CBN’s policy measures are beginning to produce results.
Cardoso said structural challenges within the Nigerian economy continue to contribute to inflationary pressure, making closer cooperation between fiscal and monetary authorities increasingly important.
He said: ‘We intend to deepen that collaboration. We understand our responsibilities, and we will do what is necessary to contain inflation. As for our single-digit inflation target, we remain committed to it.’
Speaking on developments in the foreign exchange market, Cardoso said the CBN remains committed to maintaining a transparent, liquid and willing-buyer, willing-seller foreign exchange market where prices are determined by market forces.
Responding to questions on the International Monetary Fund (IMF)’s assessment that the naira may be undervalued, he declined to endorse any specific exchange rate estimate, insisting that market fundamentals should determine the value of the currency.
‘Our position remains the same. We will continue to ensure that Nigeria has a foreign exchange market that is transparent, liquid and based on a willing-buyer, willing-seller framework. Where the exchange rate eventually settles depends on market fundamentals,’ Cardoso said.
He identified oil export earnings, foreign direct investment, domestic productivity and import substitution as some of the major factors influencing the exchange rate.
The apex bank said that confidence in the foreign exchange market has continued to improve, with daily trading volumes now exceeding one billion dollars on some trading days.
‘From the central bank’s perspective, we are satisfied that we now have a functional, transparent and open market. On some days, market turnover exceeds $1 billion, reflecting growing confidence,’ Cardoso said.
He added that Nigeria requires a competitive exchange rate capable of supporting economic growth and attracting investment.
Explaining the significance of the newly introduced Nigerian Overnight Financing Rate (NOFR), Cardoso described it as Nigeria’s official overnight risk-free benchmark interest rate.
According to him, unlike the previous system that relied largely on estimates submitted by banks, NOFR is based on actual market transactions, making the benchmark more transparent and reliable.
He said the reform aligns Nigeria with international best practices already adopted by countries such as the United Kingdom and the United States (U.S.) and will strengthen the relationship between the Monetary Policy Rate and short-term interest rates.
‘As we continue transitioning towards an inflation-targeting framework, NOFR will become an important component of monetary policy implementation,’ Cardoso said.
On concerns over declining bank lending following the withdrawal of COVID-19 regulatory forbearance, Cardoso described the reduction in credit as a temporary adjustment rather than a permanent development.
He explained that the special regulatory relief introduced during the pandemic had achieved its objective and could no longer remain in place indefinitely.
According to him, banks are adjusting their loan portfolios as part of the transition to stronger balance sheets, while lending is expected to improve gradually as recapitalisation progresses.
He said: ‘The banking system remains safe and sound. What we are seeing is a transition to a healthier and more sustainable credit environment.’
He also addressed recent regulatory actions against microfinance banks, explaining that the revocation of some licences followed serious compliance and supervisory failures.
Cardoso said the action has strengthened regulatory discipline across the industry and stressed that protecting depositors’ funds remains the apex bank’s overriding responsibility.
‘Our overriding priority is protecting depositors’ funds. That remains our bottom line. The severity of any regulatory breach determines the action we take,’ Cardoso said.
With regard to concerns over the scarcity of N100 and N200 notes, Cardoso said the denominations remain legal tender and have not been withdrawn from circulation.
He explained that the reduced availability of lower-value notes is mainly the result of declining demand as more Nigerians embrace digital payment channels.
According to him, increasing financial inclusion, the wider use of electronic payment platforms and the reduced purchasing power of lower-value notes have all contributed to the lower demand.
He said: ‘As more people adopt digital payment channels, the demand for coins and lower-denomination notes naturally declines. If there is less demand for them, there is less need to print and circulate them in large quantities.’
He highlighted that the CBN’s Payments System Vision aims to expand financial inclusion significantly over the next two years and expects digital payments to become even more widespread.
According to him, many Nigerians now use naira payment cards while travelling abroad, including during religious pilgrimages, as Nigeria is following the same path as many advanced economies where digital payments are steadily replacing cash transactions.
‘We are not suggesting that this transition will happen overnight, but it is the direction in which payment systems are evolving,’ Cardoso said.
Managing Director, AIICO Capital, Dr Femi Ademola, said the apex bank’s decision appeared to prioritise inflation targeting and foreign exchange (forex) stability, given the sticky inflation and global uncertainties, especially oil shocks due to the US-Iran war.
‘The impacts on the financial market and the economy are mixed. While the decision ensures yields on government securities remain highly attractive and draw investors away from riskier assets and into fixed-income instruments, holders of existing instruments are recording losses on their positions which may prevent them from taking new positions.
‘No doubt retaining the MPR at 26.5 per cent is a strategic move to defend the local currency by keeping returns on naira-denominated assets strong; however, high interest rates usually push investors to move away from the equities market to fixed-income, thus potentially suppressing broader stock market rallies.
‘The MPC decision in likely to keep commercial lending rates high, which directly impact lending to the private sector and thus limiting business expansion, driving up operational costs, and hindering job creation.
‘The tighter liquidity controls is also creating disincentives to banks to lend when they can easily invest in high yield government securities while selecting only a few obligors to lend to. Finally, while keeping rates high is intended to moderate inflation, research has shown that the effect of interest rate on inflation may be less than 40 per cent, because, much of Nigeria’s inflation is structural and supply-driven,’ Ademola said.
Managing Director, GTI Capital, Mr Kehinde Hassan said the retention of monetary parameters was a deliberate and telling signal about how the apex bank currently weighs the trade-offs between inflation, growth, and financial-market stability.
‘The stance clearly indicates that the bank is prioritizing inflation control and financial-system stability over stimulating economic expansion. Maintaining the MPR at this elevated level keeps monetary conditions tight, reflecting the CBN’s view that inflationary pressures remain too strong to justify easing.
‘From a market perspective, fixed-income yields on government securities will remain elevated, sustaining strong demand for T-bills and bonds among both domestic and foreign investors seeking attractive real returns. In this environment, banks are likely to continue favouring risk-free government instruments over private-sector lending.
‘Equity markets, on the other hand, may face continued pressure. High interest rates typically weigh on sectors with significant borrowing needs, including banking, manufacturing, and real estate. Nonetheless, defensive sectors such as consumer staples and telecommunications may remain relatively resilient.
‘In the forex market, holding rates supports naira stability by keeping yields attractive to foreign portfolio investors, though structural constraints mean forex liquidity challenges may persist,’ Hassan said.
He concluded that the decision was broadly consistent with CBN’s focus on restoring macroeconomic credibility and anchoring inflation expectations.