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CBN holds MPR at 26.5 per cent as inflation cools
The CBN held its policy rate at 26.5 per cent on July 21 as June inflation eased to 15.91 per cent. What the hold means for savings, loans and the naira.
The Monetary Policy Committee kept the benchmark interest rate at 26.5 per cent at its 306th meeting on July 20 and 21, 2026, the second straight hold after a 50 basis point cut in February. It is a pause, not a pivot: the CBN says the path to single-digit inflation has been delayed, not derailed.
The decision in full
- MPR: retained at 26.5 per cent.
- Standing Facilities Corridor: +50/-450 basis points around the MPR.
- Cash Reserve Requirement: 45 per cent for deposit money banks, 16 per cent for merchant banks, 75 per cent on non-TSA public sector deposits.
- Liquidity ratio: unchanged at 30 per cent.
Why the numbers support a hold
June inflation printed at 15.91 per cent year-on-year, down from 15.93 per cent in May, the first decline after three straight monthly increases. CBN Governor Olayemi Cardoso counted 11 consecutive months of disinflation. The details:
- Food inflation rose to 17.52 per cent from 16.96 per cent, on supply constraints.
- Core inflation fell to 15.92 per cent from 16.82 per cent, which the CBN attributes largely to exchange rate stability.
- The 12-month average rate fell for a sixth straight month to 17.63 per cent, and month-on-month headline eased to 1.66 per cent.
- External reserves stood at $52.52 billion as of July 17, from $50.47 billion at the end of May, enough for roughly 11 months of imports against a three-month benchmark.
Cardoso said the bank had expected to be firmly on track for single digits by early 2027, but renewed Middle East hostilities have delayed that path. Real GDP grew 3.89 per cent in the first quarter, and the composite PMI rose to 50.1 in June from 49.6, a modest expansion signal.
What the hold means on the ground
An MPR at 26.5 per cent keeps the cost of funds high for banks, which keeps pressure on lending rates and sustains the elevated returns on savings instruments and Treasury bills. That trade-off, between borrowing costs and the naira, is the whole policy debate right now. For context on how the corridor works and what it does to deposit rates, our Treasury bills guide walks through the savings side of the ledger.
The CBN also used the meeting to formalize the Nigerian Overnight Financing Rate as the official overnight risk-free benchmark, the foundation for a planned move to an inflation-targeting framework.
What to watch
The next inflation prints, especially food, which is running well above headline. Also watch Treasury bill stop rates at the next auctions, any MPC statement hinting at the next cut, and Cardoso’s own guidance: he repeated that the FX market stays a willing buyer, willing seller arrangement with no fixed target, and that turnover has exceeded $1 billion on some trading days.
Frequently asked questions
Frequently asked questions
Will the CBN cut rates soon?
The MPC has held twice after cutting once in February. Markets are reading the pause as a data-dependent stance; the next move depends on inflation staying on its downward path, particularly food prices.
What does the +50/-450 corridor mean?
Banks can borrow at the standing lending facility at MPR plus 50 basis points (27.0 per cent) and deposit at the standing deposit facility at MPR minus 450 basis points (22.0 per cent). The wide negative leg keeps a floor under short-term rates.
Why is the CRR at 45 per cent?
It means deposit money banks keep 45 per cent of deposits at the CBN without earning interest. That sequesters liquidity, supports the naira and leans against inflation, at the cost of bank profitability.
