The Monetary Policy Committee (MPC) of the Central Bank of Nigeria (CBN) will hold its fourth meeting of 2026 on 21-22 September.
At its previous meeting, held on 20-21 July 2026, the Monetary Policy Committee retained the Monetary Policy Rate at 26.5% and the asymmetric corridor at +50/-450 basis points. It also retained the Cash Reserve Requirement at 45% for deposit money banks, 16% for merchant banks and 75% for non-TSA public-sector deposits.
The case for monetary easing has strengthened since the previous meeting. Headline, food and core inflation have moderated, the naira has appreciated, gross external reserves have risen above US$54 billion, and economic growth has remained resilient. These developments provide a favourable basis for the Committee to consider policy easing.
Since the July meeting, the global economic environment has remained uncertain. Continuing geopolitical tensions and disruptions to global energy supplies have increased the volatility of crude-oil and other commodity prices, creating risks to inflation and global growth.
While food inflation rose sharply in July on both an annual and monthly basis, indicating that price pressures have not eased evenly across the consumer basket and could persist or re-emerge, food inflation eased in August, falling year-on-year to 19.57% from 20.31% and falling sharply month-on-month to 1.02% from 5.56% in July.
While the moderation in both year-on-year and month-on-month headline, core and food inflation provides stronger evidence that the disinflation process has become more broad-based and provides a favourable basis for easing, the MPC is likely to seek clearer evidence of sustained disinflation before reducing the policy rate.
Furthermore, if major central banks maintain elevated interest rates, a reduction in Nigeria’s policy rate could narrow the interest-rate differential, reduce the relative attractiveness of naira-denominated securities and weaken capital inflows. This could increase demand for foreign currency, place renewed pressure on the naira and potentially add to inflation. We therefore expect the MPC to retain the policy rate at its forthcoming meeting.
Specifically, the expectation is that the Committee will retain the Monetary Policy Rate (MPR) at 26.50% and leave the other policy parameters unchanged.
Expected MPC decision
Considerations
Inflation
Headline inflation declined to 15.43% year-on-year in July from 15.91% in June, while core inflation moderated to 14.97% from 15.92%. Month-on-month headline and
core inflation also eased, declining from 1.66% to 1.57% and from 1.66% to 0.15%, respectively.
In August, both headline and core inflation continued their disinflation trajectory.
Headline inflation declined marginally to 15.39% year-on-year from 15.43% in July, while the month-on-month rate moderated significantly to 0.71% from 1.57%, indicating a substantial slowdown in the pace of price increases. Similarly, core inflation eased from 14.97% in July to 13.29% in August on a year-on-year basis, while the month-on-month rate declined to -0.06% from 0.15%, suggesting a further easing of underlying inflationary pressures. Food inflation, which accelerated between June and July, reversed course in August, with the year-on-year rate declining to 19.57% from 20.31%, while the month-on-month rate fell sharply to 1.02% from 5.56%, pointing to a significant moderation in food price pressures.
Together, thesedevelopments suggest that disinflation has become more broad-based across the major components of the Consumer Price Index. They also strengthen the case for an eventual reduction in the policy rate, although the MPC may wish to see a more sustained and broad-based easing in inflation before commencing an easing cycle.
Although food inflation is heavily influenced by supply-side factors-including insecurity, transportation costs, inadequate storage and seasonal conditions-it can also reflect demand-side pressures. Demand can push food prices higher when domestic supply is unable to respond sufficiently.
Food inflation remains important to the MPC’s assessment because food accounts for a significant share of household expenditure and directly affects living costs and inflation expectations. Also, food prices can feed into headline inflation,
2. Growth
High interest rates continue to raise financing costs for businesses and households, constrain credit growth and weigh on private investment. A future reduction in the MPR could help ease these pressures. However, economic activity has remained resilient despite the tight monetary-policy environment. Real GDP grew by 4.43% year-on-year in the second quarter of 2026, compared with 4.23% in the corresponding period of 2025. This suggests that the economy continues to expand even with the MPR at a high level, reducing the immediate pressure on the MPC to cut rates solely to support economic activity. With growth remaining positive, the Committee has greater room to prioritise price and exchange-rate stability.
3. Exchange rate and external reserves
The naira has appreciated modestly since the July MPC meeting, strengthening from about ?1,368/US$ at the end of July to around ?1,315/US$ in early September. This appreciation should help reduce imported inflation by lowering the naira cost of imported goods and production inputs.
However, the exchange-rate pass-through to consumer prices is neither immediate nor complete. Businesses must first sell inventories purchased when the naira was weaker, while existing supply contracts and other domestic costs may delay or limit price reductions. Consequently, the full disinflationary effect of the naira’s appreciation may only become visible over time.
Gross external reserves have also strengthened since the previous MPC meeting, rising from approximately US$51.924 billion as of 31 July to above US$54 billion as of September. The increase has enhanced Nigeria’s buffer against external shocks, improved the CBN’s capacity to meet foreign exchange obligations and reinforced confidence in the naira.
The increase in reserves, together with the appreciation of the naira, gives the MPC more room to consider monetary easing. However, higher reserves do not automatically require a rate cut. Reducing rates too quickly could increase domestic liquidity and foreign-exchange demand while reducing the relative attractiveness of naira-denominated assets. This could place renewed pressure on the currency and reverse some of the recent improvements in inflation. The stronger external position therefore supports future easing, but it does not make a September rate cut necessary.
Conclusion
Economic growth has remained resilient, while inflationary pressures have continued to moderate. Headline and core inflation extended their disinflation trajectory in August, while food inflation, which had accelerated between June and July, also eased, suggesting that disinflation has become more broad-based. The naira has appreciated and gross external reserves have strengthened. A stronger naira should help curb imported inflation, although the pass-through to consumer prices is likely to occur gradually and may be incomplete. The outlook remains susceptible to global economic uncertainty, geopolitical and regional tensions, as well as volatility in energy and commodity prices.
On balance, retaining the policy rate remains the most likely outcome at the September MPC meeting. Nonetheless, the continued moderation in headline, core and food inflation strengthens the case for a measured reduction in the policy rate.