Introduction to Nigeria’s Economic Outlook
Financial analysts at Cordros Research have projected that Nigeria’s Monetary Policy Committee (MPC) will sustain a gradual easing cycle through 2026. This is expected to result in a cumulative 300 basis points reduction in the Monetary Policy Rate (MPR) to 24.0 per cent. The primary reason for this projection is the continuous downward trend of inflation and the improvement in macroeconomic conditions.
Economic Forecast for 2026
The Cordros Research forecast indicates that headline inflation will average 16.30 per cent year-on-year in 2026. This prediction is based on several factors, including a more stable foreign exchange environment, improved agricultural output, and easing global commodity prices. Additionally, the analysts expect sustained current account surpluses, steady capital inflows, and robust external reserves to strengthen the naira further. This, in turn, will create room for cautious monetary easing.
Monetary Policy Committee’s Stance
The MPC is likely to extend its shift away from the aggressive tightening stance adopted in recent years. However, the committee will remain firmly guided by the pace of disinflation, interest rate differentials, and capital flow dynamics. Despite the easing bias, policy rates are expected to remain relatively high. This is necessary to anchor inflation expectations and preserve the attractiveness of naira-denominated assets, particularly as major central banks globally move toward lower interest rates.
Interest Rates and Liquidity Management
As disinflation gains momentum and real interest rates turn increasingly positive, the MPC could implement rate cuts in measured steps. This is expected to culminate in a 300bps reduction in the MPR to 24.0 per cent by the end of 2026. Beyond interest rates, the analysts also anticipate complementary adjustments to key liquidity management tools. For instance, the Cash Reserve Ratio (CRR) for Deposit Money Banks is expected to be reduced to 40.0 per cent from the current 45.0 per cent.
Alternative Scenarios
The research firm has outlined alternative scenarios that could influence the pace and scale of policy easing. Under a bull-case scenario, where inflation averages a lower 14.91 per cent year-on-year, Cordros expects a more decisive policy response. This would result in a cumulative 400bps reduction in the MPR to 23.0 per cent by year-end. On the other hand, under a bear-case scenario in which inflation remains sticky and averages 18.70 per cent, the MPC is likely to adopt a more cautious approach. In this case, only a modest 50bps rate cut is expected, as policymakers prioritize preserving positive real returns and maintaining price stability amid lingering inflationary pressures.
Conclusion
In conclusion, monetary policy decisions in 2026 will continue to be data-dependent, with the MPC carefully weighing inflation trends, external conditions, and capital flow developments. The committee will navigate the delicate balance between growth support and macroeconomic stability. As the Nigerian economy continues to evolve, it is essential to monitor these factors closely to ensure a stable and prosperous economic environment.
