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CBN bets on easing inflation, FX stability for rate cut

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The Central Bank of Nigeria reduced the Monetary Policy Rate by 50 basis points to 26.5 per cent on 24 February 2026, after the Monetary Policy Committee’s 304th meeting. SAMI TUNJI examines the disinflation trends, foreign exchange stability and banking sector reforms supporting the decision, alongside the fiscal risks that could challenge the outlook

When the Monetary Policy Committee met for its 304th session in Abuja, it delivered what several analysts had expected by cutting the Monetary Policy Rate by 50 basis points to 26.5 per cent. However, the committee kept other key settings unchanged, retaining the standing facilities corridor around the MPR at +50 and -450 basis points and leaving the Cash Reserve Requirement for deposit money banks at 45 per cent.

The CBN’s policy shift rests on one claim and one constraint. The claim is that disinflation is holding and is being supported by the delayed effect of earlier tightening, exchange rate stability and improving food supply. The constraint is that the same environment still carries risks, including fiscal releases and election-related spending that could push inflation up again.

CBN Governor Olayemi Cardoso, speaking during a press briefing after the meeting, signalled that the rate cut was not a declaration that inflation risk had ended. When asked if Nigeria could now “go to sleep on inflation”, he said, “Caution is our watchword in the Central Bank.”

Disinflation as key trigger

Analysts at Afrinvest earlier noted that Nigeria’s “disinflation trend, alongside sustained accretion to external buffers (foreign exchange reserves up 2.4 per cent since November to $47.8 bn), continued naira appreciation (up approximately 6.7 per cent to N1,355.00/$1.00 in the official market), and stable energy goods prices (notably, PMS), provides the CBN with latitude for policy flexibility.”

Nigeria’s headline inflation rate declined marginally to 15.10 per cent in January 2026, down from 15.15 per cent recorded in December 2025, according to the Consumer Price Index report released by the National Bureau of Statistics. This decline came despite earlier projections by analysts that Nigeria’s inflation could climb to 19 per cent in January. The NBS report showed that the Consumer Price Index fell to 127.4 in January from 131.2 in December, representing a 3.8-point decrease. The NBS said the January headline inflation rate was 0.05 percentage points lower than the rate recorded in December. The inflation figure was the lowest in five years and two months, since November 2020, when inflation stood at 14.89 per cent. The MPC described January 2026 as the eleventh consecutive month of decline in year-on-year headline inflation.

The disinflation story is clearer when broken down. Food inflation declined 8.89 per cent in January 2026 from 10.84 per cent in December 2025, which the MPC linked to improved domestic food supply, sustained exchange rate stability and base effects. The food inflation figure marked the first single-digit reading in 128 months and the lowest since August 2011, when food inflation stood at 8.66 per cent.

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Core inflation eased 17.72 per cent from 18.63 per cent, driven largely by a moderation in Information and Communication services. The MPC also pointed to a short-run indicator. Month-on-month headline inflation fell to negative 2.88 per cent in January 2026 from 0.54 per cent in December 2025. A negative monthly reading suggests that the direction of prices in that month was not just slower growth but an outright decline, even if the durability of that pattern still needs to be tested across subsequent prints.

Speaking at the press briefing after the 304th MPC meeting, Cardoso said the continued deceleration in inflation was driven mainly by the “continued effects of the contractionary monetary policy”, foreign exchange market stability, robust capital inflows and improvement in the balance of payments. He added that these conditions suggested that prior tightening had helped anchor expectations. While the disinflation was central to why the committee saw room to reduce the benchmark rate, it did not loosen system liquidity aggressively as other parameters were retained.

The MPC flagged fiscal risk as releases from the federation account increase, which could pose upside risks to inflation. If fiscal expansion accelerates, it can increase liquidity and weaken the disinflation trend, particularly in an economy where supply constraints are common. In that scenario, the CBN would face a choice between defending disinflation with tighter policy or tolerating higher inflation to protect growth and credit conditions. This is why the cut looks like an incremental test rather than a clear start of a long easing cycle.

FX stability, reserves and recapitalisation

The MPC also linked its disinflation outlook to sustained stability in the foreign exchange market and stronger external buffers. Cardoso disclosed that gross external reserves rose to $50.45bn, providing import cover of 9.68 months for goods and services. The CBN tied reserve accretion to both real-economy flows and confidence. He pointed to higher export earnings and increased remittance inflows as drivers that contributed to foreign exchange stability and investor confidence. Cardoso also referenced favourable trade developments, a current account surplus, rising non-oil exports and increasing diaspora remittances.

The CBN further welcomed the newly issued Presidential Executive Order 09, which redirects oil and gas revenues into the Federation Account, and said the committee acknowledged its potential impact in improving fiscal revenue and reserve accretion. For monetary policy, the relevance is not the politics of the order but the mechanics. If more oil and gas revenue predictably flows through the federation account, fiscal planning can improve, and external buffers can strengthen, particularly if inflows support reserves and reduce pressure for deficit monetisation. However, the same story carries a risk. Higher inflows can also encourage higher spending if fiscal discipline is weak, and the MPC already warned that fiscal releases, including election-related spending, could push inflation up.

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Cardoso also laid out a list of risks that can disrupt the external stability underpinning the rate cut. He cited the possibility of global shocks, uncertainties around oil prices, and the effect of pre-election spending if not contained.

The CBN governor further noted that banking sector indicators remained within regulatory thresholds and described the sector as resilient. He noted progress in recapitalisation, stating that 20 banks had fully met the new minimum capital requirements and that a further 13 were at advanced stages of their capital raising processes, which he said were expected to conclude within the stipulated time. He also noted that banks raised N4.05tn in verified and approved capital ahead of the 31 March 2026, recapitalisation deadline set by the CBN. The PUNCH observed that this figure was nearly double the N2.4 tn reportedly raised as of April 2025. Cardoso said N2.90tn of the amount, representing 71.6 per cent, was mobilised domestically, while N1.15tn, equivalent to 28.33 per cent, came from foreign participation.

“In summary, 71.67 per cent is domestic mobilisation and 28.33 per cent is foreign participation. This balance, in my view, represents a mix of domestic and foreign, which signals broad investor engagement and confidence in the sector,” Cardoso said.

The CBN governor also had to address stability risks tied to institutions under intervention. Cardoso said depositor funds in those institutions remain secure and that operations continue under close supervisory and regulatory oversight. He said this to prevent recapitalisation anxieties from turning into deposit flight or market rumours, both of which can disrupt the transmission of monetary policy.

A further stability issue is the payments and fintech ecosystem. The governor said the CBN recognised the importance of innovation but would ensure that risks to financial stability were properly managed. “We are advancing work already on a very comprehensive framework for digital assets,” Cardoso said, noting that the process would involve consultation and scrutiny to ensure transparency and long-term resilience. He disclosed that there are over 430 licensed fintech operators in Nigeria and described the segment as systemically important, adding that the CBN was strengthening supervisory oversight to address cyber threats and other emerging risks.

Likely impact of rate cut on Nigeria’s economy

In a statement, the Minister of Finance and Coordinating Minister of the Economy, Mr Wale Edun, welcomed the CBN’s decision to cut the MPR by 50 basis points to 26.5 per cent, describing it as a signal of growing confidence in the nation’s economic stabilisation. He noted that the decision reflects “strong coordination between fiscal and monetary authorities as the country transitions from stabilisation to economic consolidation”.

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Edun explained that the rate cut provides the government with “fiscal space to accelerate investment in infrastructure, energy, agriculture and social services”. He added, “For businesses, it improves access to credit, supports private sector investment, and strengthens job creation in the real economy.”

The Director-General of the Nigeria Employers’ Consultative Association, Adewale Oyerinde, earlier told The PUNCH that the marginal cut indicated that monetary authorities were responding to sustained pressures facing businesses.

“The marginal reduction in the benchmark interest rate represents a cautious but noteworthy signal that monetary authorities are beginning to respond to the sustained pressures facing businesses and the productive sector,” Oyerinde said. He added, “While the 50 basis point reduction may not immediately translate into significantly lower lending rates, it reflects a gradual shift toward supporting economic growth without undermining price stability.”

Oyerinde stressed that the overall policy stance remained tight due to the retention of the Cash Reserve Ratio at 45 per cent for commercial banks and other liquidity controls. “With a substantial portion of bank deposits still sterilised, the capacity of financial institutions to expand credit to the real sector may remain constrained in the near term,” he said.

In a policy brief shared with The PUNCH, the Director of the Centre for the Promotion of Private Enterprise, Dr Muda Yusuf, described the rate cut as growth-supportive but warned that weak policy transmission and fiscal vulnerabilities could blunt its impact. “This policy direction is appropriate and growth-supportive. It reflects improving macroeconomic fundamentals and reinforces confidence in the economy’s stabilisation trajectory,” Yusuf said. He cautioned that lending rates might remain elevated due to structural constraints, stressing, “Unless these structural rigidities are addressed, the benefits of monetary easing may not fully translate into lower borrowing costs for manufacturers, SMEs, agriculture, and other productive sectors.”

Yusuf added that fiscal consolidation remained the missing anchor. “Without fiscal consolidation, monetary easing could be undermined by continued fiscal pressures and crowding-out effects in the financial system,” he said.

Looking ahead, Cardoso said the outlook suggests that “the current momentum of domestic disinflation will continue in the near term”, supported by exchange rate stability and improved food supply. However, he warned that “increased fiscal releases, including election-related spending, could pose upside risk to the outlook.” He reaffirmed the MPC’s commitment to “an evidence-based policy framework, firmly anchored on the Bank’s core mandate of ensuring price stability, while safeguarding the soundness and resilience of the financial system.”

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Highest bidder won’t automatically get oil blocks — FG

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The Federal Government on Tuesday said the highest financial bidder would not automatically emerge as the winner of an oil block in the ongoing 2025 Licensing Round, insisting that technical competence and operational capability would play a decisive role in determining successful bidders.

Speaking at the 2025 Commercial Bid Conference in Abuja, the Chief Executive of the Nigerian Upstream Petroleum Regulatory Commission, Oritsemeyiwa Eyesan, said the commission’s evaluation process was designed to ensure petroleum assets were awarded to companies capable of developing them, rather than firms that simply submitted the highest financial offers.

She said the assessment process was rigorous, objective and aimed at securing the best long-term value for Nigeria’s upstream petroleum sector.

“The evaluation was rigorous. It was objective. It was simple. And it was to place assets in the hands of bidders capable of delivering the best overall long-term value. It wasn’t, or it isn’t going to be just about your ability to be the highest bidder.

“We want to ensure that you have the right capabilities to deliver the assets, in addition to having the financial resources to deliver these assets. The team carefully assessed each bidder’s competence and experience, organisational and operational capacity, credibility of their proposed work programme, resource commitment to execution, and the ability to deliver within the proposed time frame,” Eyesan said.

She explained that the commission assessed bidders based on competence, experience, operational capacity, the credibility of their work programmes, resource commitment and their ability to execute projects within specified timelines.

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“Today, the commercial components of the qualified bids will be opened. And as was said earlier, forget whatever you’ve been told, forget whatever you’ve heard, nobody has seen anybody’s commercial bids. And we will demonstrate that today.

“This approach of ensuring close bids is in recognition of the fact that these equities must be operated by credible, competent operators. Not, I repeat, by operators who can bid the highest,” she added.

The commercial bid opening marks the final stage of the licensing process before the successful companies are announced.

PUNCH Online reports that the 2025 Licensing Round was announced on November 11, 2025, in line with the Petroleum Industry Act 2021, with 50 oil and gas blocks offered across seven sedimentary basins.

The assets comprise 16 Niger Delta onshore blocks, 18 shallow water blocks, one deep offshore block, three blocks in the Benin Basin, four in the Anambra Basin, four in the Chad Basin and four in the Benue Trough.

The bid portal opened on December 1, 2025, while a pre-bid conference was held on January 14, 2026, in Lagos to guide prospective investors on the bidding requirements.

Registration and prequalification submissions closed on February 27, 2026, with the prequalification process completed on March 16.

Under the licensing guidelines, winning bids are determined through a weighted evaluation of signature bonus commitments, proposed work programmes and performance security, combining both technical and commercial scores rather than financial offers alone.

The framework is intended to ensure that petroleum assets are awarded to investors with the financial strength, technical expertise and operational capacity required to accelerate exploration and production in Nigeria’s upstream sector.

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FG securities deliver positive real returns to investors

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Nigeria’s fixed-income market is offering investors something that has been scarce in recent years – real returns that outpace the inflation rate.

When investment returns beat the inflation rate, investors gain, as the value of their money grows in purchasing power terms, not just in nominal value. This is exactly what the Federal Government bonds and treasury bills now offer investors.

Headline inflation fell to 15.91 per cent in June 2026 from 15.93 per cent in May, halting three straight months of increases, according to the National Bureau of Statistics showed.

The slight decline has been enough to push the yields on some government debt instruments above the inflation rate, allowing investors to preserve and grow their purchasing power after a long period of negative real returns.

The improvement, however, has not extended to all products. The latest FGN Savings Bond, targeted mainly at retail investors, still offers a maximum coupon of 15.716 per cent, leaving it marginally below the prevailing inflation rate.

But higher sovereign borrowing costs have largely driven the return to positive real yields. At the June FGN bond auction, the January 2035 and April 2037 bonds cleared at marginal rates of 18.34 per cent and 18.35 per cent, translating to positive real returns of roughly 244 basis points above June’s inflation rate.

Likewise, the 364-day treasury bill sold at the 15 July auction recorded a stop rate of 17.66 per cent, still remaining ahead of inflation.

There is a stronger investor appetite as market participants reposition their portfolios.

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Treasury bill turnover increased 137.49 per cent to N1.51tn, while FGN bond turnover climbed 75.91 per cent to N1.20tn in the week ended 19 June, reflecting stronger trading activity across the sovereign debt market.

“Positive real returns make treasury bills and government bonds attractive again because investors are rewarded in real, inflation-adjusted terms,” said an emerging markets expert, Ike Ibeabuchi.

The Financial Markets Dealers Association said pricing in the domestic fixed-income market continues to be shaped by inflation expectations and liquidity conditions, even as several major central banks around the world begin shifting towards monetary policy easing.

Analysts, however, caution that the current period of attractive inflation-adjusted returns may be temporary. A former central banker, Chukwunonso Iheoma, estimates the Monetary Policy Rate to fall to 25.5 per cent by the last quarter of 2025.

Standard Chartered, on the other hand, expects the MPR to decline to 25 per cent by the end of 2026. Chief economist, Razia Khan, said the bank now sees room for 150 basis points of monetary easing this year. An Abuja-based fixed income analyst, Joshua Tan, agreed with Khan, but stressed that impending higher energy prices could kibosh positive expectations about lower inflation and interest rate cuts this year.

Cowry Research expects the Monetary Policy Committee to retain its cautious stance at its July meeting but believes sustained moderation in inflation could open the door to the first interest rate cut in September.

But S&P Global warned that rising energy prices could erode the positive real returns currently available on government securities: “Increases in fuel costs as a result of the war in the Middle East have driven up costs among sub-Saharan African companies, putting upwards pressure on inflation and likely bringing to an end cycle of interest rate easing seen in a number of economies in the region.”

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A Professor of Economics and Public Policy at the University of Uyo, Prof Akpan Ekpo, noted that the MPC would likely maintain the current rate because of the uncertainty created by the US-Iran conflict.

According to GTI Limited, Treasury bills, particularly the 364-day instruments, currently provide the strongest mix of yield, liquidity and inflation protection. In contrast, FGN Savings Bonds remain slightly below inflation, highlighting the widening gap between institutional fixed-income instruments and retail-focused savings products.

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Oil cargoes meant for naira-for-crude deal supplied to Dangote – NNPC

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The Nigerian National Petroleum Company Limited has insisted that it supplied all available crude oil cargoes allocated under the Federal Government’s naira-for-crude initiative to the Dangote Petroleum Refinery, saying there had been no withholding on its part.

The national oil company stated this even as a top management official of the Dangote Group disclosed exclusively to The PUNCH that the refinery was receiving just four million barrels of crude oil monthly under the arrangement, instead of about 13 million barrels envisaged after President Bola Tinubu’s 2024 directive.

The refinery had attributed its decision to switch from naira-denominated fuel sales to dollar transactions to the crude supply shortfall, saying it would also increase exports of refined petroleum products to earn foreign exchange.

Responding on Monday, the NNPC, through its spokesman, Andy Odeh, said the company had fully discharged its obligations under the naira-for-crude policy. “As a 7.25 per cent equity shareholder in Dangote Petroleum Refinery and Petrochemicals, NNPC Limited has a direct and genuine interest in seeing the refinery operate at full capacity. That is not in dispute.

“What the figures being cited require is context. Under the naira-denominated crude supply arrangement, NNPC Limited has allocated 100 per cent of all available naira crude cargoes to DPRP in 2026 — there has been no withholding on our part. Actual off-take in any period is shaped by several variables: crude availability, nomination timelines, and the refinery’s own operational scheduling.

Odeh said the NNPC has met its obligations to the refinery, saying the two parties are resolving any existing gaps together. “NNPC Limited has met its 2026 supply obligations to the refinery. Our engagement with DPRP management remains constructive, and where any gaps exist, we are resolving them together — as the partners we are.

“A fully supplied, fully operational Dangote refinery serving the Nigerian market is an obligation NNPC Limited shares without reservation,” he added.

However, the Dangote Group maintained that the crude volumes supplied under the arrangement were inadequate to sustain naira-denominated fuel sales.

A top management official of the Dangote Group had told The PUNCH that crude supply under the naira-for-crude arrangement had been limited to just four million barrels monthly despite the increase in Nigeria’s crude oil production.

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The official, who pleaded anonymity because of the sensitivity of the matter, said the refinery was now set to export a larger percentage of its products in exchange for foreign exchange.

“Since the traders have brought lots of imported products to the market, we are focusing on exports. We can’t, and we shouldn’t be fighting against the government’s policies,” the source said.

Our correspondent told the official that exporting without adequately supplying the domestic market would not be good for the country, but he responded with a question: “Is issuing massive import licences and releasing forex for imports good for the country, when 45 per cent of our production can meet 100 per cent of the entire country’s requirements in terms of petrol, diesel and aviation fuel?”

When told that the NNPC said it had increased crude supply to the Dangote refinery, the official replied, “Do you think that they will keep quiet if we process the naira crude and export the products? We are getting just four million barrels monthly.”

With the sale of petrol in dollars to local marketers, the Dangote official disclosed that the refinery would now process whatever crude it receives under the naira arrangement and supply the equivalent refined products in naira to the Nigerian market through the NNPC.

“We will account for every barrel of crude we receive against the naira payment by supplying equivalent products in naira. We will do that through the NNPC. The NNPC buys a lot from us,” he said.

The refinery had maintained that the inability to secure the expected crude volumes under the naira-for-crude initiative compelled it to abandon naira-denominated fuel sales and adopt dollar pricing for petroleum products.

Last week, the refinery announced a new dollar-denominated pricing template, fixing the ex-depot price of petrol at $0.779 per litre, diesel at $1.087 per litre and aviation fuel at $0.942 per litre.

The move has drawn criticism from petroleum marketers, who warned that it could increase pressure on fuel prices, although the Nigerian Midstream and Downstream Petroleum Regulatory Authority said the decision was consistent with the provisions of the Petroleum Industry Act, which allows refiners to recover their costs.

Supply worsens

Meanwhile, petrol supply in the Federal Capital Territory, Abuja, worsened on Monday with the closure of some major filling stations in Abuja and a fresh increase in the pump price of petrol.

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Checks by one of our correspondents showed that some stations operated by NNPC Limited and MRS along the Airport Road Expressway were shut when visited on Monday.

At stations that were dispensing the product, petrol was being sold at between N1,250 and N1,280 per litre. Bovas sold petrol at N1,250 per litre, while Azman Filling Station at 6th Avenue dispensed the product at N1,280 per litre. Salbas also sold petrol at N1,280 per litre.

The development has further heightened concerns among motorists and other consumers over the rising cost and availability of petrol in the nation’s capital. For motorists in Abuja, Monday’s development meant longer searches for petrol, closed stations and prices as high as N1,280 per litre at outlets that had the product available.

Meanwhile, truck traffic has surged across major private petroleum depots in Lagos as marketers scramble for petrol supplies following the fifth consecutive day of suspended loading at Dangote Petroleum Refinery amid growing expectations that wholesale prices could rise when operations resume.

Expert reacts

Meanwhile, Professor Emeritus of Petroleum Economics and Principal Facilitator at the FUPRE Energy Business School, Wumi Iledare, said the Dangote refinery’s decision to sell petrol in dollars should be viewed within the broader context of petroleum economics and Nigeria’s energy security rather than merely the currency in which products are priced.

According to Iledare, the move is a commercial response to the realities of the global oil market, where crude oil, the refinery’s major feedstock, is traded in United States dollars.

Iledare explained that pricing refined products in dollars enables the refinery to reduce its exposure to exchange rate volatility and provides greater revenue certainty, although it shifts part of the foreign exchange risk to fuel marketers and, ultimately, consumers, where the costs are passed on.

He stressed that the refinery’s dollar pricing would not automatically translate to higher fuel prices, noting that domestic petrol prices would instead become more closely tied to movements in international crude oil prices and the naira-dollar exchange rate.

“Does this necessarily mean higher fuel prices? Not necessarily. What it does mean is that domestic fuel prices become more closely linked to two key variables: international crude oil prices and the naira-dollar exchange rate. If crude prices rise or the naira weakens, pump prices are likely to increase. Conversely, if crude prices decline or the naira strengthens, consumers should also expect prices to adjust downward. That is how a market-oriented pricing system is expected to function,” he said.

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The petroleum expert maintained that despite concerns over dollar-denominated pricing, the Dangote refinery had strengthened Nigeria’s energy security by reducing dependence on imported petrol and improving the availability of petroleum products.

He, however, noted that domestic refining alone could not guarantee affordability, saying fuel prices would continue to depend on exchange rate stability, international crude prices, logistics costs and the level of competition in the downstream sector.

“The refinery has significantly improved the availability of petroleum products by reducing Nigeria’s dependence on imported PMS. That alone makes the country less vulnerable to disruptions in international supply chains and enhances supply reliability.

“This is why I would say that Dangote Refinery can shield Nigeria more effectively from supply shocks than from price shocks. Domestic refining improves energy security, but it cannot completely insulate Nigeria from global petroleum market dynamics because crude oil still has an international opportunity cost, whether it is refined in Lagos, Rotterdam, or Houston,” he stated.

On the implications for the naira, Iledare argued that pricing petroleum products in dollars would not automatically weaken the local currency. “As for the impact on the naira, the answer is more nuanced than many assume. Dollar pricing by itself does not automatically weaken the naira. What matters is whether the arrangement increases or reduces Nigeria’s net demand for foreign exchange,” he said.

He urged policymakers to focus less on the currency in which petroleum products are priced and more on building an efficient and competitive downstream market.

“The real issue is therefore not the currency of pricing. The real issue is whether Nigeria’s downstream petroleum market satisfies the four tests of good public policy: efficiency, effectiveness, equity, and ethics. Those are the standards by which this development should be judged,” he added.

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