CBN retained the interest rate at 26.5% amid inflation risks, exchange rate concerns and rising pressure on businesses and SMEs

The Monetary Policy Committee of the Central Bank of Nigeria on Wednesday retained the benchmark interest rate at 26.5 per cent, citing renewed inflationary pressure, external economic risks and the need to preserve exchange rate stability.

Also read: CBN Warns States Against Reckless Borrowing

Governor of the Central Bank of Nigeria, Olayemi Cardoso, announced the decision at the end of the MPC’s 305th meeting in Abuja, saying the committee agreed to maintain its current policy stance amid growing global and domestic uncertainties.

“The committee’s decision is as follows: retain the monetary policy rate at 26.5 per cent,” Cardoso said during the post-meeting briefing.

The committee also retained the asymmetric corridor around the Monetary Policy Rate at +50/-450 basis points, while leaving the Cash Reserve Requirement for Deposit Money Banks at 45 per cent and Merchant Banks at 16 per cent.

The decision came after Nigeria’s headline inflation rose for the second consecutive month to 15.69 per cent in April 2026 from 15.38 per cent recorded in March, according to the latest Consumer Price Index released by the National Bureau of Statistics.

Food inflation also climbed to 16.06 per cent from 14.31 per cent, driven largely by higher transportation costs and seasonal supply pressures, although core inflation eased slightly to 15.86 per cent.

The MPC attributed the renewed inflationary pressure to external shocks, especially the spillover effects of the Middle East crisis, which has increased global energy prices and logistics costs.

Despite the inflation uptick, the committee expressed confidence that the pressure would prove temporary.

“Although inflation has risen marginally for two consecutive months, largely induced by external shocks, the MPC recognised its transitory nature,” the committee stated.

Cardoso noted that Nigeria had recorded 11 consecutive months of disinflation before the recent increase and said the apex bank would continue prioritising exchange rate stability as part of its inflation-control strategy.

“It is key that the centrepiece of our toolkit is ensuring that our foreign exchange rate remains stable,” he said.

The CBN governor also dismissed suggestions that the apex bank was aggressively defending the naira through constant intervention in the foreign exchange market.

“The answer is that it’s not true,” Cardoso said, explaining that market reforms had significantly changed the structure of the foreign exchange market.

According to him, daily foreign exchange turnover has increased from around $100m when the current administration took office to approximately $550m, with occasional peaks of $1bn.

He added that CBN interventions accounted for only about 1.2 to 1.3 per cent of total market turnover in 2025.

The governor further disclosed that Nigeria’s gross external reserves stood at $49.49bn as of May 15, 2026, compared with $48.35bn at the end of March, representing about 9.04 months of import cover.

Cardoso described the reserves position as resilient despite fluctuations linked to debt servicing and government obligations.

The CBN interest rate decision generated mixed reactions from members of the Organised Private Sector, with business groups warning that elevated borrowing costs continue to squeeze investment and weaken small businesses.

President of the Lagos Chamber of Commerce and Industry, Leye Kupoluyi, said the chamber understood the need for caution but warned that high interest rates remained a major constraint for manufacturers and SMEs.

“An elevated interest rate continues to constrain private sector investment, especially SMEs and manufacturing, thereby weighing on output and job creation,” Kupoluyi said.

Director of the Centre for the Promotion of Private Enterprise, Dr Muda Yusuf, supported the MPC’s decision, arguing that inflationary risks linked to geopolitical tensions and election-related spending made a rate cut unrealistic for now.

“The situation is bad enough for many businesses. We don’t want an additional hike in interest rates,” Yusuf said.

However, President of the Association of Small Business Owners of Nigeria, Dr Femi Egbesola, criticised the decision and urged the apex bank to lower rates at its next meeting.

“We believe that lowering the interest rate will go a long way to support more access to funding for SMEs,” Egbesola said.

Cardoso also addressed the ongoing banking recapitalisation programme, revealing that 33 banks had already met the new capital requirements.

He said domestic investors accounted for about 74 per cent of the capital raised, while foreign investors contributed approximately 26 per cent, describing the outcome as a strong sign of investor confidence in Nigeria’s economy.

On SME financing, the CBN governor disclosed that new credit to small and medium enterprises rose from N153bn in March to about N199bn in April 2026.

He added that the apex bank was collaborating with other institutions to improve lending conditions and reduce risks in the sector.

The MPC also projected that economic growth would remain resilient in 2026 despite global uncertainties, with inflation expected to gradually moderate as tighter monetary policy, improved food supply and exchange rate stability begin to take stronger effect.

Also read: Nigerians Push for Lower Interest Rates Ahead of MPC – CBN

The next MPC meeting is scheduled for July 20 and 21, 2026.