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The Central Bank of Nigeria (CBN) could resume monetary policy easing at its September meeting, with Bank of America (BofA) forecasting the first interest rate cut since February as inflation continues to moderate and the naira maintains relative stability.
The CBN’s Monetary Policy Committee (MPC) is scheduled to meet on September 21 and 22, with the Monetary Policy Rate (MPR) currently standing at 26.5 per cent.
BofA’s expectation comes against a backdrop of easing inflationary pressures and a comparatively stable foreign exchange market, conditions that could provide the apex bank with greater room to reduce borrowing costs.
Inflation moderation creates room for easing
Nigeria’s inflation rate declined for the third consecutive month in August, easing marginally to 15.39 per cent from 15.43 per cent in July.
Food inflation also moderated to 19.57 per cent, marking its first decline in approximately six months and providing further evidence of a gradual easing in price pressures.
According to BofA analyst Raghav Adlakha, the combination of slower inflation and exchange-rate stability has created room for the CBN to consider a cautious easing cycle.
The naira has also remained comparatively stable during 2026, appreciating by about 8 per cent against the dollardespite heightened tensions in global financial markets. The currency’s performance has provided additional support for the case for lower policy rates.
CBN has held rates since February
The CBN has reduced its benchmark interest rate only once in 2026.
In February, the MPC lowered the MPR by 50 basis points, from 27 per cent to 26.5 per cent. The committee subsequently maintained the rate at each of its next four meetings as it continued to balance inflation management with broader macroeconomic stability.
A fresh reduction in September would therefore represent a shift from the CBN’s recent approach of keeping borrowing costs elevated to contain inflation and support stability in the foreign exchange market.
Fuel prices and election spending pose inflation risks
Despite the improving inflation picture, the September policy decision remains subject to emerging risks to the price outlook.
Rising fuel prices could place renewed pressure on household and business costs, while increased government spending ahead of Nigeria’s 2027 elections could add to aggregate demand and contribute to inflationary pressures.
These factors could influence both the timing and magnitude of any potential rate reduction, particularly as the MPC assesses whether recent improvements in inflation are sustainable.
The external environment also remains a consideration, with geopolitical tensions, including the Middle East crisis, potentially affecting energy prices, foreign exchange conditions and Nigeria’s broader inflation outlook.
Lower rates could affect borrowing and fixed-income markets
A move towards lower policy rates could eventually influence borrowing costs across the financial system, potentially reducing the cost of credit for businesses and other borrowers.
Lower policy rates could also affect yields across segments of Nigeria’s fixed-income market as investors adjust to changing monetary conditions.
The September MPC meeting will therefore be closely watched by banks, investors and businesses as the CBN weighs the recent moderation in inflation against exchange-rate stability and renewed risks to the price outlook.
“The MPC’s decision will be closely watched by banks, investors and businesses as the CBN weighs easing inflation against exchange rate stability and renewed risks to the price outlooks such as the Middle East crisis,” said Abuja-based economist Nonso Ihuoma.
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