Standard Chartered Plc expects the Central Bank of Nigeria (CBN) to reduce interest rates by only 150 basis points (bps) in 2026, saying persistent inflationary pressures will likely force the apex bank to adopt a slower and more cautious monetary easing cycle than previously anticipated. The revised outlook was disclosed by Razia Khan, Chief Economist for Africa and the Middle East at Standard Chartered, in an investment note where the bank revised its outlook for Nigeria’s monetary policy.
Standard Chartered now expects the Monetary Policy Rate (MPR) to end 2026 at 25%, while also raising its average inflation forecast for the year to 15.5% from an earlier projection of 12%.
“We now see inflation averaging 15.5% in 2026 compared with 12% previously and 14.7% next year from a prior forecast of 13.8%. 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,” Khan said.
Despite its cautious outlook for next year, the investment bank expects inflation to ease more meaningfully thereafter, paving the way for a more aggressive monetary easing cycle.
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Khan projects that the CBN could reduce interest rates by 700 basis points after the January 2027 elections, followed by an additional 350 basis points in 2028, as inflation moderates and macroeconomic conditions improve.
The CBN has maintained a cautious monetary policy stance in recent months as it seeks to balance inflation control with economic growth. At the conclusion of its 305th Monetary Policy Committee (MPC) meeting on May 20, the committee retained the Monetary Policy Rate (MPR) at 26.5%, extending its wait-and-see approach after delivering a 50-basis-point rate cut in February.
The MPC also left the Cash Reserve Ratio (CRR) unchanged at 45% for commercial banks and 16% for merchant banks, while retaining the Standing Facilities Corridor at +50/-450 basis points around the MPR. It equally maintained the 75% CRR on non-TSA public sector deposits.
The committee said its decision reflected the need to sustain tight monetary conditions following renewed inflationary pressures, including consecutive increases in headline inflation recorded in March and April, while allowing more time to assess the impact of previous policy measures on price stability.
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Standard Chartered’s latest outlook comes as investors await the release of Nigeria’s June Consumer Price Index (CPI) by the National Bureau of Statistics (NBS) on Wednesday, a key data point expected to shape expectations ahead of the CBN’s next MPC meeting on July 21.
Headline inflation rose to 15.93% in May 2026, up from 15.69% in April, indicating that price pressures remain raised despite a slowdown in monthly inflation.
The NBS also reported that the Consumer Price Index climbed to 140.7 points in May from 138.3 points in April. While annual averages for food, urban, rural and core inflation have continued to decline compared with the previous year, economists expect June inflation to edge above 16%.
A higher-than-expected inflation reading could reinforce the CBN’s cautious stance on monetary policy, strengthening expectations that interest rates will remain raised for longer despite growing calls from businesses for lower borrowing costs.