Standard Chartered Plc. expects the Central Bank of Nigeria (CBN) to reduce interest rates by only 150 basis points (bps) in 2026. This revised outlook suggests persistent inflationary pressures will likely compel the apex bank to adopt a slower and more cautious monetary easing cycle than previously anticipated.

Razia Khan, Chief Economist for Africa and the Middle East at Standard Chartered, disclosed this in an investment note, where the bank updated its outlook for Nigeria’s monetary policy. Standard Chartered now projects the Monetary Policy Rate (MPR) to end 2026 at 25%.

The bank also raised its average inflation forecast for 2026 to 15.5% from an earlier projection of 12%. For 2027, the average inflation forecast was increased to 14.7% from a prior 13.8%.

Khan stated, “We now see scope for 150 basis points of policy easing in 2026 — previously under review — taking the monetary policy rate to 25% at year-end.” She added that lingering inflationary pressures have significantly reduced the room for aggressive monetary easing.

Despite this cautious outlook for the near term, Standard Chartered expects inflation to ease more meaningfully thereafter. This moderation could pave the way for a more aggressive monetary easing cycle.

Khan projects that the CBN could reduce interest rates by 700 basis points after the January 2027 elections. An additional 350 basis points cut is forecast for 2028, as inflation moderates and macroeconomic conditions improve.

The CBN has maintained a cautious monetary policy stance in recent months, aiming to balance inflation control with economic growth. At the conclusion of its 305th Monetary Policy Committee (MPC) meeting on May 20, 2026, the committee retained the Monetary Policy Rate (MPR) at 26.5%, following a 50-basis-point rate cut in February.

The MPC also left the Cash Reserve Ratio (CRR) unchanged at 45% for commercial banks and 16% for merchant banks. The Standing Facilities Corridor was retained at +50/-450 basis points around the MPR, and the 75% CRR on non-TSA public sector deposits was maintained.

The committee's decision reflected the need to sustain tight monetary conditions due to renewed inflationary pressures, including consecutive increases in headline inflation recorded in March and April. This approach allows more time to assess the impact of previous policy measures on price stability.

Standard Chartered’s latest outlook comes as investors await the release of Nigeria’s June Consumer Price Index (CPI) by the National Bureau of Statistics (NBS) on Wednesday. This key data point is expected to shape expectations ahead of the CBN’s next MPC meeting on July 21.

Headline inflation rose to 15.93% in May 2026, up from 15.69% in April, indicating elevated price pressures despite a slowdown in monthly inflation. The NBS also reported that the Consumer Price Index climbed to 140.7 points in May from 138.3 points in April. Economists expect June inflation to edge above 16%.

A higher-than-expected inflation reading could reinforce the CBN’s cautious stance on monetary policy. This would strengthen expectations that interest rates will remain elevated for longer, despite growing calls from businesses for lower borrowing costs.