Standard Chartered has significantly lowered its expectations for monetary policy easing in Nigeria, forecasting that the Central Bank of Nigeria (CBN) will reduce its benchmark interest rate by only 150 basis points in 2026 as persistent inflation continues to constrain policymakers.
In a research note released on Monday, the London-headquartered bank said it now expects the Monetary Policy Rate (MPR) to end the year at 25%, implying a cumulative 150-basis-point reduction from the current 26.5%. A basis point is one-hundredth of a percentage point, meaning a 150-basis-point cut is equivalent to a 1.5 percentage-point reduction.
The revised outlook marks a more cautious stance than the lender’s earlier expectations, reflecting growing concerns that inflationary pressures are proving more persistent than previously anticipated.
A key driver of the revision is Standard Chartered’s higher inflation forecast. The bank now expects Nigeria’s average inflation rate to reach 15.5% in 2026, sharply above its previous estimate of 12%. For 2027, it projects inflation will average 14.7%, compared with an earlier forecast of 13.8%.
The adjustment follows Nigeria’s latest inflation data, which showed headline inflation rising for a third consecutive month to 15.93% year-on-year in May from 15.69% in April, underscoring the challenge facing policymakers as they seek to balance price stability with economic growth.
“We now see scope for 150 basis points of policy easing in 2026, taking the monetary policy rate to 25% at year-end,” said Razia Khan, Standard Chartered’s Chief Economist for Africa and the Middle East. She noted that persistent inflation has significantly reduced the central bank’s room for aggressive rate cuts in the near term.
The CBN has maintained a cautious policy stance since cutting rates by 50 basis points in February. At its May Monetary Policy Committee meeting, the bank left the MPR unchanged at 26.5%, while retaining the Cash Reserve Ratio at 45% for commercial banks and 16% for merchant banks. The asymmetric corridor around the policy rate also remained unchanged at +50 and -450 basis points.
Despite the restrained near-term outlook, Standard Chartered expects a more pronounced easing cycle after Nigeria’s January 2027 general elections. The bank projects cumulative rate cuts of 700 basis points after the elections, followed by a further 350 basis points in 2028 as inflation moderates and macroeconomic conditions improve.
Investors are now focused on the release of Nigeria’s June Consumer Price Index, which is expected to provide fresh clues on inflation trends ahead of the CBN’s next Monetary Policy Committee meeting scheduled for July 21.
For businesses and households, the outlook suggests borrowing costs are likely to remain elevated for much of the year. Commercial bank lending rates continue to hover around the mid-30% range, limiting credit expansion and weighing on investment, even as policymakers seek to sustain the country’s fragile economic recovery.
