Standard Chartered Plc. has revised its forecast for Nigeria's monetary policy trajectory, projecting that the Central Bank of Nigeria will reduce interest rates by a modest 150 basis points through 2026, leaving the Monetary Policy Rate at 25% by year-end.
The revised outlook was outlined by Razia Khan, Chief Economist for Africa and the Middle East at Standard Chartered, in an investment note. The bank now expects inflation to average 15.5% in 2026, a marked increase from its earlier forecast of 12%. For the following year, the inflation projection has been raised to 14.7% from a previous estimate of 13.8%.
Khan stated that lingering inflationary pressures have substantially narrowed the room for aggressive monetary easing, compelling a more cautious approach than originally anticipated. "We now see scope for 150 basis points of policy easing in 2026 — previously under review — taking the monetary policy rate to 25% at year-end," she said.
Despite the restrained outlook for 2026, Standard Chartered expects inflation to moderate more decisively thereafter, creating conditions for a stronger easing cycle. Khan projects that the CBN could lower interest rates by 700 basis points following the January 2027 elections, with an additional 350 basis points in 2028 as price pressures subside and the macroeconomic environment improves.
The CBN has held a cautious stance in recent months. At the conclusion of its 305th Monetary Policy Committee meeting on May 20, the committee retained the MPR at 26.5%, extending a wait-and-see posture after a 50-basis-point cut delivered in February. The Cash Reserve Ratio was left unchanged at 45% for commercial banks and 16% for merchant banks, while the Standing Facilities Corridor remained at +50/-450 basis points around the MPR. The 75% CRR on non-TSA public sector deposits was also maintained.
The MPC cited the need to sustain tight monetary conditions amid renewed inflationary pressures, pointing to consecutive increases in headline inflation recorded in March and April, and the importance of allowing more time to evaluate the impact of previous policy measures on price stability.
Headline inflation rose to 15.93% in May 2026, up from 15.69% in April, indicating that price pressures remain elevated even as monthly inflation has slowed. The Consumer Price Index climbed to 140.7 points in May from 138.3 points in April, according to the National Bureau of Statistics. Economists anticipate that the June inflation figure, scheduled for release by the NBS on Wednesday, could edge above 16%.
Investors are watching the June CPI data closely as it will shape expectations ahead of the CBN's next MPC meeting on July 21. A higher-than-expected reading could reinforce the central bank's cautious policy posture and strengthen the view that interest rates will stay elevated for longer, despite mounting calls from the business community for lower borrowing costs.
