CBN Holds Benchmark Interest Rate at 26.5% Amid Middle East Crisis
By Patience Ikpeme
The Central Bank of Nigeria (CBN) has decided to keep the country’s main benchmark interest rate, known as the Monetary Policy Rate (MPR), at 26.5 per cent.
Speaking to journalists in Abuja on Tuesday at the end of the two-day Monetary Policy Committee (MPC) meeting, CBN Governor Mr. Olayemi Cardoso stated that the decision came after a careful evaluation of the economic risks facing the nation. He noted that while local inflation slowed down slightly in June 2026, global conflicts, especially fresh tensions in the Middle East, are threatening energy prices and pushing up living costs worldwide.
“The committee’s decision to maintain the current policy stance follows a thorough assessment of the balance of risk. Although headline inflation moderated marginally in June 2026, global uncertainties have heightened due mainly to the renewed hostilities in the Middle East,” Cardoso said.
“The Committee decided as follows: retain the monetary policy rate at 26.5 per cent,” he added, referring to the decisions reached during the 306th meeting of the committee which ran from July 20 to July 21.
Along with keeping the interest rate unchanged, the committee decided to hold the Standing Facilities Corridor around the main rate at +50 / -450 basis points. It also kept the Cash Reserve Ratio—the percentage of deposits banks must keep with the central bank—at 45 per cent for regular commercial banks, 16 per cent for merchant banks, and 75 per cent for public sector deposits outside the Treasury Single Account.
Addressing the broader economic outlook, Cardoso explained that the central bank was previously making steady progress toward lowering inflation before international crisis hit the global economy.
“Before recent global shocks, the Bank expected inflation to be on track for its desired level by early 2027, with a pathway to single-digit inflation,” Cardoso said, adding that “the duration of these external shocks remains uncertain.”
Even with these hurdles, the CBN reported 11 straight months where inflation rate increases slowed down, showing that past decisions are starting to work. However, internal structural problems in the country continue to push prices up, making closer cooperation between the central bank and government financial authorities essential.
On the foreign exchange market, Cardoso declared that the naira is now operating under a functional, transparent market driven by willing buyers and willing sellers. He revealed that daily trading volume in the official foreign exchange market now exceeds $1 billion on some days.
The governor noted that factors like oil sales earnings, foreign investments, local production, and reducing reliance on imports will continue to shape the naira’s value. He chose not to support the International Monetary Fund’s (IMF) assessment on what the exact true value of the naira should be, insisting that current market conditions support a competitive currency.
Cardoso also introduced the Nigerian Overnight Financing Rate (NOFR), which serves as the official standard for short-term interest rates based on real market transactions rather than estimates submitted by banks. This step aligns Nigeria with financial standards used in countries like the United States and the United Kingdom, helping the central bank better control inflation over time.
Responding to concerns about reduced bank lending following the end of COVID-19 relief policies, the governor explained that the drop in loans is only temporary. He noted that banks adjusted their books after the emergency policies ended and that credit to businesses will pick up again as financial institutions finish their ongoing capital expansion.
Regarding bank strength, Cardoso praised the financial sector for a successful recapitalisation drive, revealing that 33 out of 37 banks successfully met the new minimum capital requirements before the deadline without needing any extension. A large portion of this capital was raised locally from Nigerian investors, leaving local institutions among the strongest across Africa.
For the four banks that missed the deadline due to past regulatory issues, Cardoso assured citizens that there is no reason to panic as those banks remain safe, sound, and under close watch while normal operations continue.
On smaller financial institutions, the governor stated that six microfinance bank licences were withdrawn due to severe failures in following regulations. He pointed out that protecting public deposits is the central bank’s main focus and that this step has already forced other microfinance institutions to follow rules more strictly.
Finally, Cardoso addressed rumors about lower currency notes, clarifying that N100 and N200 notes remain legal money alongside all other naira notes. He explained that the scarcity of smaller notes is caused by changing habits rather than the bank withdrawing them.
As more Nigerians embrace electronic channels, online transfers, and debit cards—even for international journeys like religious pilgrimages—the demand for physical small notes has naturally dropped. While the shift toward electronic payments will happen gradually, the central bank sees digital finance as the future of Nigeria’s payment system.
