September 18, 2026/Cordros Report
The Central Bank of Nigeria’s (CBN) Monetary Policy Committee (MPC) is scheduled to hold its fourth meeting of 2026 on 21 – 22 September. We believe developments since the July meeting strongly favour the MPC maintaining its current policy stance. Globally, major central banks are adopting a more hawkish stance, providing no external impetus for the CBN to ease policy. Domestically, the resumption of disinflation, robust growth, improved external buffers, and relative exchange rate stability provide immediate justification for easing. At the same time, elevated liquidity in the financial system remains a consideration for the MPC. Taken together, these global and domestic dynamics lead us to suggest that the MPC will maintain the MPR at 26.50% at the meeting, resulting in a HOLD decision. We also expect the Committee to adjust the Standing Facilities Corridor to +50/–500bps around the MPR. All other policy parameters are expected to remain unchanged.
GDP Activity Accelerates in Q2-26
Nigeria’s economy accelerated in Q2-26, with real GDP growth rising to 4.43% y/y (Q1-26: +3.89% y/y; Q2-25: +4.23% y/y), marking the strongest Q2 growth rate in five years. Real GDP stood at NGN53.47 trillion, while nominal GDP reached NGN119.27 trillion, representing nominal growth of 18.4% y/y. The services sector remained the dominant driver of growth, expanding by 4.60% y/y (Q2-25: +3.94% y/y) and accounting for 56.6% of aggregate GDP. Growth was supported by strong performance in telecommunications, financial and insurance, real estate and trade. Agriculture also continued its recovery, growing by 4.39% y/y (Q2-25: +2.82% y/y), supported by improved planting and harvesting conditions and favourable crop prices.
Industrial sector growth moderated to 3.96% y/y in Q2-26 (Q2-25: +7.46% y/y), although the slowdown appears to have been driven largely by a high base effect rather than a broad based deterioration in activity. For the oil sector, average daily production recovered to 1.63 million barrels per day (mbpd) in Q2-26, up from 1.55 mbpd in Q1-26. The improvement in production coincided with a rebound in oil sector real GDP growth to 7.31% y/y (Q1-26: +2.57% y/y; Q2-25: +20.86% y/y). The non-oil sector grew by 4.31% y/y in Q2-26, accelerating from 3.94% y/y in Q1-26.
High-frequency private sector data corroborate the improvement in economic activity. The Composite Purchasing Managers’ Index (PMI) has remained in expansion territory and strengthened further in August following the July reading. The index strengthened to 52.7 points in August 2026, from 51.1 points in July and 50.1 points in June. The August reading points to a broad based expansion across all major sectors, while simultaneous improvements in new orders and employment provide further evidence of strengthening underlying economic activity. On balance, we estimate real GDP growth of 4.55% y/y in Q3-26 and expect the PMI to strengthen further in September. We therefore expect the Committee to maintain a constructive assessment of the domestic growth outlook, with the Q2-26 GDP outturn and improving private sector activity providing evidence of continued economic momentum. The Committee is therefore likely to emphasise the need to sustain the recovery in output, recognise the Q2-26 growth acceleration as evidence of progress under the government’s stabilisation reforms, and reaffirm the policy discipline needed to preserve macroeconomic stability.
Disinflation Resumes, but Food Prices Remain a Risk
The inflation environment has improved materially since the July meeting. Headline inflation fell for the third consecutive month to 15.39% y/y in August 2026 (July: 15.43% y/y), reflecting a moderation in core inflation to 13.29% y/y (June: 14.97% y/y) and food inflation to 19.57% y/y (July: 20.31% y/y). On a month-on-month basis, the pace of price increases decelerated further to 0.71% in August from 1.57% m/m in July, suggesting that the earlier fuel price shock pass-through may be fading. However, the recent re-escalation of the Middle East conflict has prompted an upward revision of energy price assumptions and could disrupt the current disinflationary trend.
Food inflation remained elevated at 19.57% in August (July: 20.31% y/y), well above headline inflation of 15.39% y/y. The August decline marked a break in the consecutive monthly increase recorded since February 2026. Elevated food price pressures reflect increases in the prices of key staples, including onions, tomatoes, cassava flakes (garri), rice, and plantains. On a month-on-month basis, food prices slowed sharply to 1.02% in August from 5.56% in July, likely reflecting the impact of the harvest of early-maturing crops such as maize, and millet. This highlights the importance of structural and supply-side factors in Nigeria’s inflation dynamics, many of which fall outside the scope of monetary policy.
We expect the Committee to take note of the three-month disinflationary trend and acknowledge that headline inflation remained at 15.39% in August, within the CBN’s tolerance band of 14.50% – 18.50%. The resumption of the headline disinflation, moderating core inflation, and decelerating m/m price pressure reduce the near-term case for a rate hike. Conversely, persistence food price pressures and the re-escalation of the Middle East crisis argue against a rate cut, particularly given the risk of renewed second-round effects on domestic energy prices. We therefore expect the Committee to HOLD the MPR at 26.5%, acknowledging the broadly positive headline inflation trend while monitoring food inflation and energy prices as the primary upside risk to the inflation outlook.
Naira Firms Further as External Reserves Reach an 18-year High
Nigeria’s external position has strengthened materially since the July meeting. Gross foreign exchange (FX) reserves climbed to a record USD54.67 billion as of 16 September 2026 – an 18 year high, from USD51.92 billion in July and well above the CBN’s full year 2026 projection of USD51.04 billion. At this level, reserves cover approximately 11 months of imports, well above the commonly cited three-month adequacy benchmark, thereby strengthening the CBN’s capacity to manage FX market pressures and supporting investor confidence in the naira.
The naira traded at NGN1,331.28/USD at the official Nigerian Foreign Exchange Market (NFEM) as of 17 September 2026, approximately 3.2% stronger than at the July meeting and 7.3% stronger YTD. The parallel market traded within a band of NGN1,380.00-NGN1,400.00/USD, narrowing the spread with the official rate to below 6.0%, consistent with improved market confidence and reduced speculative pressure.
The stronger reserve position and relative naira stability provide the Committee with additional justification for maintaining the currency policy rate. The current MPR maintains a substantial interest rate differential that supports portfolio investment inflows and, in turn, the accumulation of external reserves. A rate cut would compress this premium and could increase pressure on the naira, while the strength of the external position reduces the immediate need for further tightening from an external stability perspective. The Committee is therefore expected to recognise these external sector dynamics as an important consideration supporting a HOLD at the meeting.
Structural Liquidity Surplus and OMO Dynamics Point to Wider Corridor
Beyond the headline rate decision, a key feature of the pre-meeting environment is the growing structural surplus in banking system liquidity. System liquidity climbed to NGN4.12 trillion in August (July: NGN3.84 trillion), driven by OMO and FGN bond maturities returning liquidity to the banking system. Critically, average daily utilisation of the CBN’s Standing Lending Facility (SLF) fell by 87.7% m/m to NGN6.35 billion in August (July: NGN51.75 billion), while average daily placements under the Standard Deposit Facility (SDF) stood at NGN4.15 trillion in August (July: NGN3.65 trillion). Together, these developments suggest that banks have limited recourse to central bank funding amid abundant system liquidity.
The OMO and T-bill auction dynamics reinforce this narrative and provide further evidence of the CBN’s evolving stance on liquidity management. The CBN sterilised NGN12.02 trillion through OMO operations in August alone – more than double the NGN7.18 trillion sterilised in July. More instructively, demand strengthened despite broadly unchanged allotments. The Bid-Offer ratio rose to 4.9x in August from 3.9x in July, following the 12 August circular and the associated increase in domestic demand at OMO auctions. Average allotments stood at NGN2.00 trillion, below the NGN2.16 trillion January-July average. This suggests that, while the CBN has maintained a broadly consistent sterilisation pattern in terms of allotment volumes, the gradual decline in stop rates – from a TYD average of 20.10% to 18.39% at the most recent September auction – points to a gradual easing in the pricing of liquidity absorption.
Taken together, these dynamics support widening the lower bound of the asymmetric corridor from MPR minus 450bps (22.0%) to MPR minus 500bps (21.5%). This would reduce the relative attractiveness of passive placement at the CBN OMO auctions and provide greater room for money market rates to adjust lower, while avoiding the broader interest rate and carry trade implications associated with an outright MPR cut.
Global Monetary Policy: ECB, Fed and BoJ Tighten, BoE Holds
The global monetary policy landscape has become more differentiated since the July meeting. The European Central Bank (ECB) delivered its second consecutive 25bps rate hike at its 10 September 2026 meeting, raising the deposit rate to 2.50%. The ECB also raised the main refinancing rate to 2.65%, citing continued inflationary pressures from the Middle East conflict. Meanwhile, the US Federal Reserve raised the target range for the federal funds rate by 25bps to 3.75%-4.00% at its 16 September meeting, marking the first rate hike since July 2023. The decision was unanimous, with the FOMC voting 12-0 in favour of the increase. The Bank of Japan (BoJ) also raised its policy rate by 25bps to 1.25% at its 18 September meeting. In contrast, the Bank of England maintained Bank rate at 3.75% at its September 2026 meeting, leaving the policy rate unchanged since June 2026.
The ECB’s second consecutive hike illustrates how persistent energy driven inflation pressures can prompt renewed monetary tightening, even in economies with relatively low policy rates. However, Nigeria’s domestic inflation and external sector conditions differ materially. Domestic headline inflation remains within the CBN’s tolerance band of 14.50%–18.50%, disinflation has resumed, and external reserves are at a record high. The Fed’s hawkish decision and the ECB’s renewed tightening, against a backdrop of elevated inflation and uncertainty, provide little external impetus for the Nigerian MPC to ease policy stance. This is broadly consistent with our expectation that the MPC will maintain the MPR at its 307th meeting in September 2026.
MPC to Hold Policy Rate and Adjust Standing Facilities Corridor
The 307th MPC meeting convenes against a backdrop of stronger growth, the resumption of disinflation, a firmer naira, higher FX reserves, elevated system liquidity and a tightening global monetary policy landscape. Against this backdrop, we expect the MPC to maintain the MPR at 26.50% while adjusting the Standing Facilities Corridor to +50/–500bps around the MPR, bringing the effective SDF rate to 21.5% and the SLF rate to 27.0%. All other parameters are expected to remain unchanged, including CRR for DMBs at 45.00%, the CRR for Merchant Banks at 16.00%, the CRR for non-TSA public sector deposits at 75.00%, and the liquidity ratio at 30.00%. For investors, the expected decision should preserve the relative attractiveness of naira carry positions and support near term yield stability. We see the November 2026 MPC meeting as the next potential window for a policy pivot, conditional on the disinflation trajectory remaining intact.