Divergent Views on the Central Bank of Nigeria’s Monetary Policy Decision
Market analysts have expressed varied opinions on whether the Monetary Policy Committee (MPC) of the Central Bank of Nigeria (CBN) will reduce the benchmark interest rate or maintain it at 27 percent during its ongoing meeting. The decision is complicated by recent economic indicators, particularly the unexpected drop in the January Consumer Price Index (CPI), which saw headline inflation fall to 15.10 percent from 15.15 percent in December 2025.
The decline in inflation was primarily driven by a decrease in food prices, marking the third consecutive month of moderation in inflation. This trend has shifted the MPC’s stance from a more hawkish approach to one that could allow for policy easing. Additionally, the naira has shown significant strength in both the official and parallel foreign exchange markets, with a year-to-date appreciation of 6.9 percent. This strength is attributed to the CBN’s interventions, including providing Bureau de Change operators with weekly access to $150,000.
Despite these positive developments, the total monthly supply to the Bureau de Change segment remains at approximately $50 million, which is much lower than the $1.0 billion seen before the pandemic. This disparity highlights structural improvements in the foreign exchange market, as speculative demand has decreased and corporate needs have shifted toward the official window.
Analyst Perspectives on the MPC Meeting
Afrinvest analysts believe that the MPC may consider a modest policy easing of 50 to 100 basis points during its meeting on 23 and 24 February 2026. Their view is based on eleven consecutive months of inflation moderation to 15.1 percent in January 2026. Other factors supporting this outlook include increased foreign exchange reserves, sustained naira appreciation, and stable energy goods prices.
They also note that growing expectations of rate cuts in major advanced economies in the first half of 2026 could further improve the external environment for easing. However, they caution that downside risks remain, such as large maturities in the first quarter and uncertainty surrounding the financing mix of the 2026 fiscal deficit.
CardinalStone’s Analysis
CardinalStone analysts highlight that while inflation is moderating and short-term rates are converging around 22.0 percent, the CBN appears cautious about liquidity risks. The governor’s comments at the National Economic Conference emphasized the need to avoid liquidity overhang, which could threaten recent policy reforms.
The CBN has net-issued N10.9 trillion through Open Market Operations this year and has maintained an attractive Standing Deposit Facility rate to encourage banks to deposit funds. Analysts believe the CBN may choose to keep the policy rate unchanged to signal concern about liquidity risk while adjusting the asymmetric corridor to align the Standing Deposit Facility rate with Open Market Operations yields.
They estimate a 60 percent probability of the CBN maintaining the rate and a 40 percent chance of a 50 to 100 basis point cut.
FXTM’s Viewpoint
Mr. Lukman Otunuga, a senior market analyst at FXTM, supports the argument for a rate cut, citing the unexpected slowdown in inflation and the naira’s eight percent appreciation against the dollar. He believes the CBN has a strong case to reduce the benchmark rate, with the question being how much the central bank will cut rather than whether it will do so.
Conclusion
As the MPC prepares to make its decision, the interplay of inflation trends, foreign exchange dynamics, and liquidity concerns will shape its outcome. While some analysts foresee a rate cut, others emphasize the need for caution. The final decision will likely reflect a balance between these competing factors.
