Rising geopolitical tensions, particularly the prolonged conflict in the Middle East, are increasingly shaping the Central Bank of Nigeria's (CBN) monetary policy, forcing the apex bank to maintain a cautious approach to inflation and exchange rate management.
Following its 306th Monetary Policy Committee (MPC) meeting, the CBN retained the Monetary Policy Rate (MPR) at 26.5 percent, citing uncertainties caused by the global energy market and the potential impact of the Middle East crisis on Nigeria's economy.
CBN Governor Olayemi Cardoso said the decision was necessary despite a slight decline in inflation, warning that continued instability in the Middle East could push up global oil prices, increase import costs, and place renewed pressure on the naira.
Although higher crude oil prices have boosted Nigeria's foreign reserves through increased oil revenues, the country remains heavily dependent on imported petroleum products, machinery, medicines, and industrial inputs. As a result, rising global energy prices continue to fuel inflation by increasing transportation and production costs.
The International Monetary Fund (IMF) also cautioned that renewed conflict in the Middle East could prolong supply chain disruptions, increase commodity prices, and worsen food insecurity despite improvements in Nigeria's macroeconomic indicators.
The CBN had reduced interest rates earlier in 2026, but ongoing global uncertainties have delayed further monetary easing. While headline and core inflation have shown modest improvement, food inflation remains elevated due to insecurity, poor infrastructure, and supply chain challenges.
Cardoso noted that the bank's policies have helped stabilize the exchange rate and moderate inflation, but stressed that sustaining macroeconomic stability remains essential for attracting investment and supporting long-term economic growth.
Economic analysts say businesses will continue to face high borrowing costs as long as inflation risks persist, with experts urging the Federal Government to strengthen targeted intervention funding to support the private sector.
Despite the challenges, Nigeria's economy recorded 3.89 percent growth in the first quarter of 2026, driven largely by agriculture, telecommunications, financial services, construction, and trade. The IMF projects economic growth of 4.1 percent in 2026, although it warns that rising living costs remain a significant concern for millions of Nigerians.
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