This week’s MPC meeting is shaping up to be the most consequential since the monetary policy reset of February 2024. Inflation remains mildly elevated, the naira is only just finding its footing, and liquidity tightening is beginning to squeeze credit markets. The Central Bank of Nigeria (CBN) now faces a critical dilemma: maintain aggressive tightening to cement the deceleration in inflation or pivot cautiously to avoid choking an already fragile recovery.
For many businesses, the recent policy dividends offered a glimmer of hope. When the CBN cut the benchmark rate by 50 basis points (bps) to 27% during the September round, the reduction felt like real breathing space after paying over 30% for loans since last year. But this wasn’t merely symbolic as the marginal rate cut, albeit a welcome relief, still left much more to be desired. It, however, reflected in consecutive months of disinflation, coupled with rising external reserves, now above US$46 billion, and the CBN’s willingness to recalibrate without sacrificing fiscal discipline.
As the 303rd MPC meeting (the last meeting for the year) convenes on 24–25 November 2025 in Abuja, anticipation is building. Nigeria’s headline inflation has eased from 18.02% in September to 16.1% in October, prompting markets to adjust their expectations. Analysts now forecast another 50–100 bps cut, while more bullish observers argue that as much as 250 bps could be justified. With reserves stabilising above US$46 billion and the naira showing modest strength, the CBN stands at a pivotal crossroads.
Under Cardoso, the MPC met ten times between Jan. 2024 and Sept. 2025, hiking aggressively through 2024 except for a November pause as inflation topped 33% amid FX volatility and soaring fuel and food costs. In 2025, it held rates before turning dovish in September as fundamentals improved.
The core question, therefore, is whether the MPC will lean toward popular sentiment or exercise further caution. Whatever direction the MPC chooses will reverberate across the economy: reshaping borrowing costs, investor sentiment, capital flows, and ultimately determining whether Nigeria can secure a stronger footing before 2026.
FX Market Fragility
Nigeria’s foreign-exchange market has been showing signs of life since H2,25 but the recovery remains fragile. FX turnover has improved in recent months as the CBN cleared larger parts of its backlog and tightened liquidity; however, volumes remain well below pre-2021 levels, when autonomous inflows and investor participation were significantly stronger. The current uptick reflects policy discipline rather than a structural revival, and that distinction matters.
The naira’s recent appreciation offers some relief, but the currency still faces headwinds. Festive-season demand is set to rise sharply as importers front-load purchases, holiday-makers flooding back to the country, and households increase spending; pressures that historically weaken the naira. At the same time, oil receipts remain subdued, with production consistently below OPEC quota and pipeline disruptions limiting dollar inflows. Remittances may provide a buffer, but they are insufficient to offset weak export earnings.
Against this backdrop, the MPC’s next move carries enormous signalling power. A measured, confidence-boosting decision, one that reinforces the CBN’s commitment to market-reflective pricing, transparent intervention rules, and liquidity stability, could anchor expectations and attract deeper participation from foreign investors.
But an overly dovish stance could revive dollar speculation and reverse the naira’s modest gains, hence the FX market’s path in 2026 will hinge on the strength of that signal.
Credit Conditions & Growth Risks
The CBN’s recent policy actions, notably its cut of the MPR to 27% and the narrowing of the standing facility corridor, have injected record liquidity into the market. But this easing comes amid tighter Open Market Operations (OMO) and Standing Deposit Facility (SDF) dynamics, which are changing how banks deploy capital. As of late, system liquidity had surged to N5.73 trillion, driven by massive placements in the SDF as banks ramped down riskier lending.
That boost hasn’t fully translated into private-sector credit. SMEs and manufacturing firms, the backbone of Nigeria’s job creation, continue to experience weak credit uptake. With tighter CRR rules and sterilized liquidity, banks have mixed incentives, even as the rate cut aims to lower borrowing costs.
Herein lies the dilemma: can the CBN ease further without causing a credit crunch? excessive tightening risks choking off funding to the real economy; too much easing could reignite inflation or encourage speculative lending. The MPC must find a careful balance, one that supports growth without compromising financial stability.
Fiscal–Monetary Coordination
Nigeria’s fiscal and monetary authorities are entering a sensitive phase where coordination will determine whether recent gains can be sustained. FAAC inflows have increased due to higher oil revenues and improved revenue collection, providing the government with more spending capacity. However, spending pressures are mounting just as the CBN tries to guide the economy toward lower inflation and a more stable naira.
Analysts warn that as government borrowing intensifies toward year-end, the risk of crowding out becomes more pronounced, especially as treasury issuances compete directly with private-sector credit. Recent analyses show that liquidity injections from the CBN’s policy shifts have not translated into stronger lending to manufacturers and SMEs, who remain squeezed even as rates fall.
If fiscal expansion accelerates without discipline, it could undermine monetary tightening, weaken the naira, and blunt the impact of the MPC’s rate adjustments. Effective coordination is now essential to sustain both stability and growth.
What investors should expect?
As the MPC meets, investors should focus on four critical signals that will shape market behaviour into 2026. First is the forward guidance on inflation. Although headline inflation has eased in recent months, core inflation remains stubborn. Whether the CBN forecasts a sustained decline or flags renewed pressure from festive-season demand and weak oil inflows will determine bond yields and risk appetite.
Second, the Bank’s exchange-rate management philosophy will be closely watched. Clear rules on intervention, FX supply, and market-reflective pricing could strengthen investor confidence and attract more foreign participation back into the FX and fixed-income markets.
Third, clarity around CRR harmonisation and liquidity calibration will influence bank behaviour. Any move to streamline cash-reserve requirements or ease liquidity constraints could free up credit for the private sector and lift equity performance.
Finally, the continual locking up of public-sector liquidity through the non-TSA public sector deposit will lift market yields, support naira stability, and signal stronger policy discipline; factors investors typically reward.
Ultimately, these signals will shape asset pricing across the board: from equities and treasury bills to long-dated bonds and the naira itself. Investors should prepare for swift market repricing as the policy path becomes clearer.
