Introduction to Nigeria’s Monetary Policy Rate
Nigeria’s benchmark Monetary Policy Rate (MPR), also known as the interest rate, has been maintained at 27% by the Central Bank of Nigeria (CBN) in its last Monetary Policy Committee (MPC) meeting in November 2025. Investors are optimistic about the interest rate forecast trend in 2026.
Background
The Central Bank’s aggressive monetary policy tightening trends throughout 2024-2025 and the first rate cut in September 2025 have left markets debating the timing and magnitude of further moves of the interest rate in Africa’s most populous country, Nigeria.
Top Nigerian Interest Rate Scenarios
The CBN’s data-dependent stance has led to several possible interest rate scenarios shaping investor expectations. These scenarios include:
Gradual Easing (Base Case)
Most analysts expect measured rate cuts if disinflation continues. Headline inflation fell to 15.52% in November 2025, with the CBN’s average rate in 2026 projected to be 12.94%. This would be driven by Naira stability, higher agricultural yield productivity, and higher oil output. The CBN could cut the MPR by 100-200 basis points across multiple meetings, potentially bringing the rate to the 20-23% range by year-end. This would ease borrowing costs, support private-sector credit, and help achieve the projected GDP growth of 4.49% in 2026.
Prolonged High Rates (Hawkish Scenario)
Nigeria’s persistent fiscal pressures could keep rates elevated, with the 2026 budget anticipating a deficit of 12-24 trillion. The nation’s debt servicing portfolio is already consuming a large share of the total revenue, which is becoming worrisome. The MPR could remain above 25% through much of 2026, preserving high yields on treasury bills and bonds but squeezing corporate profitability.
Asymmetric Corridor Adjustments as Early Signals
Domestic and international investors are closely watching the CBN’s asymmetric corridor around the MPR for policy hints on the direction of the nation’s economy in 2026. Nigeria’s Foreign Direct Investment (FDI) rebounded in Q3 2025, increasing to $720 million, a 700% increase from $90 million in Q2. Any narrowing of the corridor or shifts in cash reserve requirements could precede formal rate changes, providing clues about the bank’s bias well before MPC announcements.
Global and External Shocks Scenario
External factors remain a wildcard, with renewed global geopolitical tensions potentially impacting the global market and slightly impacting the global GDP growth outlook. The World Bank has projected the global economy to grow by 2.6% in 2026. Stronger global financial conditions or a marginal drop in commodity prices could disrupt forex inflows and reignite inflation, compelling the CBN to adopt a more cautious stance.
Conclusion
The next CBN MPC meeting in February 2026 will serve as the first major test of the CBN’s direction for the Full-Year 2026. Fixed-income investors hope for sustained high rates to lock in yields, while equity and growth investors eagerly anticipate the easing of rates to drive broader market recovery. The CBN’s delicate balancing act between inflation control and economic support will define portfolio strategies throughout the year, with the World Bank, IMF, and CBN all projecting the Nigerian economy to grow by 4.49%, 4.4%, and 4.4%, respectively.
