CBN rate cut premature amid rising oil, PMS prices — United Capital

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By Babajide Komolafe

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The Central Bank of Nigeria (CBN) may delay a reduction in its Monetary Policy Rate (MPR), as rising prices of crude oil and Premium Motor Spirit (PMS) create fresh uncertainty over inflation, according to United Capital Research.

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MPR is the benchmark interest rate that determines cost of money in the financial system.

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The research firm stated: “Although inflation has slowed over the past three months, its short-term outlook remains uncertain.”

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It attributed the recent moderation in interest rate to several factors, stating that “the Naira’s appreciation against the US Dollar, seasonal declines in food prices from harvests, and a modest rise in crude oil supported the recent deceleration.”

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However, it cautioned that “a sustained slowdown through year-end would justify a rate cut,” but added that “the sharp increase in crude oil and Premium Motor Spirit (PMS) prices clouds the outlook for the next quarter, making a rate cut premature.”

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The report said the Monetary Policy Committee (MPC), which meets from today to tomorrow, would have to weigh the improving domestic macroeconomic conditions against emerging global risks.

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According to United Capital, “Nigeria’s macroeconomic environment has improved since July 2026, suggesting scope for a rate cut.”

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But it noted that “spillover from the US-Iran crisis and higher global energy costs cloud the short-term outlook, limiting chances of easing.”

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It further stated: “A hike is also unlikely, as it would raise business costs and conflict with recent domestic gains.”

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United Capital therefore expects the MPC to “HOLD policy stance, allowing time to gauge the impact of global developments on Nigeria.”

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The research firm expects the MPC to “Maintain the Monetary Policy Rate (MPR) at 26.5%,” while retaining the Standing Facilities Corridor at “+50/-450 basis points.”

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It also expects the CBN to “Maintain the Cash Reserve Requirement (CRR) for Deposit Money Banks at 45.0%,” retain merchant banks’ CRR at “16.0%,” and maintain the liquidity ratio at “30.0%.”

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On the external sector, United Capital said “Nigeria’s external sector remains resilient, supporting short-term exchange rate stability.”

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