Business
CBN rate cut premature amid rising oil, PMS prices — United Capital
By Babajide Komolafe
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.
MPR is the benchmark interest rate that determines cost of money in the financial system.
The research firm stated: “Although inflation has slowed over the past three months, its short-term outlook remains uncertain.”
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.”
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.”
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.
According to United Capital, “Nigeria’s macroeconomic environment has improved since July 2026, suggesting scope for a rate cut.”
But it noted that “spillover from the US-Iran crisis and higher global energy costs cloud the short-term outlook, limiting chances of easing.”
It further stated: “A hike is also unlikely, as it would raise business costs and conflict with recent domestic gains.”
United Capital therefore expects the MPC to “HOLD policy stance, allowing time to gauge the impact of global developments on Nigeria.”
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.”
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%.”
On the external sector, United Capital said “Nigeria’s external sector remains resilient, supporting short-term exchange rate stability.”
