Nigeria’s Monetary Policy Committee (MPC) of the Central Bank of Nigeria (CBN) is set for a closely watched meeting on February 22 and 23, with analysts divided over whether policymakers will initiate a rate cut or maintain the current stance amid improving macroeconomic indicators.
The benchmark Monetary Policy Rate (MPR) has remained at 27.0% as the CBN continues to prioritize price and exchange rate stability. However, sustained disinflation, stronger external reserves and exchange rate gains have intensified speculation that the Committee may soon pivot toward cautious policy normalization.
Headline inflation eased to 15.1% in January 2026, marking the eleventh consecutive month of decline. While the sustained downward trend has strengthened the case for easing, analysts say the durability of disinflation — rather than the headline number alone — will likely determine the MPC’s decision.
External buffers have also improved. Nigeria’s foreign exchange reserves have risen 2.4% since November to $47.8 billion, while the naira has appreciated by 6.7% to N1,355 per dollar at the official market. Stable premium motor spirit (PMS) prices and expectations of monetary easing across advanced economies in the first half of 2026 further enhance the external backdrop.
Head of Research at Afrinvest West Africa, Asimiyu Damilare, believes macroeconomic developments have strengthened the argument for a rate cut.
“I will say that recent macroeconomic developments have strengthened the case for a potential policy rate cut at the upcoming MPC meeting,” he said.
Damilare pointed to the sustained disinflation trend, reserve accretion and exchange rate appreciation as providing the CBN with greater policy flexibility.
He also highlighted voting patterns at the November 2025 MPC meeting, where five members voted for a rate cut while six opted to retain the MPR at 27.0%. The narrow split suggests that the Committee may already be leaning toward normalization.
However, the Managing Director and Chief Executive Officer of Arthur Steven Asset Management Limited struck a more cautious tone, arguing that it may be too early in the year to implement a significant policy move.
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“It might be a bit early for us to see a significant move by the MPC,” he said, citing the need for more comprehensive data.
He warned that rising system liquidity — and its potential inflationary implications — could prompt the MPC to either hold rates steady or even lean toward tightening if price pressures re-emerge.
Portfolio Manager at CFG Africa, Olumayowa Bolujoko, acknowledged that the CBN has made meaningful progress in stabilizing the macroeconomic environment.
Exchange rate appreciation, sufficient external reserves and moderating inflation would ordinarily support a gradual shift toward growth-friendly policy. However, Bolujoko emphasized that structural considerations remain critical.
A 10.2% month-on-month increase in currency outside banks suggests elevated transactional liquidity in the real economy, which could sustain inflationary pressures. Additionally, election-cycle spending dynamics may heighten near-term price risks.
Bolujoko added that maintaining yield attractiveness to support Foreign Portfolio Investment (FPI) inflows remains vital. Given the sensitivity of exchange rate stability to capital flows, a premature rate cut could undermine external positioning and reverse recent FX gains.
“Taken together — elevated system liquidity, potential near-term inflation pressures, and the strategic imperative of sustaining capital inflows — we expect the MPC to maintain the policy rate at its current level while continuing to assess the durability of the disinflation trend before signaling any policy pivot,” he said.
The upcoming MPC meeting presents a classic policy trade-off between supporting growth and preserving hard-won stability.
While macroeconomic indicators increasingly support gradual normalization, the balance of risks suggests the MPC may opt to hold the MPR at 27.0% while signaling a dovish bias.
Analysts broadly agree that even if no immediate rate cut is announced, a formal pivot toward easing could emerge in subsequent meetings — contingent on sustained disinflation, controlled liquidity conditions and continued external stability.
For now, the probability of a hold appears slightly higher, but momentum toward a measured policy shift is steadily building.