CBN to grapple with post-war rate dilemma amid inflation threats,

By Chinwendu Obienyi

The Monetary Policy Committee (MPC) of the Central Bank of Nigeria (CBN) is expected to face one of its most delicate policy decisions in months as easing global oil prices following the United States-Iran ceasefire collide with persistent domestic inflationary pressures, a report from SBM Intelligence said on Wednesday.

This is coming after ceasefire agreement, which reopened the Strait of Hormuz after weeks of disruption, triggered a sharp decline in global crude prices, with Brent crude falling from a peak of about $114 per barrel to nearly $101 per barrel.

The development has eased fears of prolonged energy supply disruptions and raised expectations of moderation in fuel and transport costs across oil-importing economies.

For Nigeria, however, the policy implications are far more complex, the SBM report titled; The Persian Trap Aftermath: Has West Africa Escaped a Deeper Crisis? said.

During the conflict, rising oil prices pushed petrol pump prices from around N830 per litre to as high as N1,325, while diesel prices climbed above N1,550 per litre, worsening transport costs and food inflation. The resulting price shocks, the firm said, contributed to a sustained rise in consumer prices and complicated the CBN’s inflation-fighting efforts.

Data from SBM Intelligence showed that 82.7 per cent of traders surveyed across major Nigerian cities reported price increases linked directly to the conflict, while 76.4 per cent experienced significant increases in transportation costs.

Headline inflation rose to 15.93 per cent in May 2026, marking the third consecutive monthly increase, while food inflation stood at 16.96 per cent year-on-year (y/y). The SBM Jollof Index, which tracks the cost of preparing a standard family-sized pot of jollof rice, reached N30,435 in April, 19.4 per cent from N25,486 six months earlier, before easing slightly to N29,800 as of early June.

Against this backdrop, the MPC maintained the benchmark Monetary Policy Rate (MPR) at 26.50 per cent throughout the conflict, prioritising exchange-rate stability, foreign investor confidence and inflation control, according to its chairman, Olayemi Cardoso.

Hence, SBM Intelligence say the committee now faces a difficult balancing act.

According to the research and strategic communications consulting firm, with oil prices retreating and the immediate supply shock fading, pressure may grow on policymakers to begin discussing a gradual easing cycle to support economic activity and reduce borrowing costs for businesses and households.

The firm warned that premature rate cuts could undermine recent gains in inflation management, particularly given lingering uncertainties surrounding the ceasefire agreement and broader geopolitical tensions in the Middle East.

“We urge caution even so. Mine-clearance in the strait will take weeks, shipping backlogs at alternative ports need resolution, and the terms of the agreement may still “inject unease and uncertainty” if ratification stalls. The IMF has welcomed the ceasefire but underlined that the risk of fresh energy disruptions remains elevated, particularly given the unresolved posture of Houthi forces in Yemen and the absence of any normalisation framework between Iran and Israel.

So the challenge ahead for the MPC is to engineer a measured easing cycle as global prices fall, without triggering renewed inflation if the ceasefire breaks down or if the US–Iran agreement stalls in ratification. This requires close monitoring of Hormuz mine-clearance progress and the resumption curve of Iranian export volumes”, the report said.

SBM Intelligence stressed that the situation highlights structural weaknesses within Nigeria’s economy. According to the firm, despite the country’s status as Africa’s largest oil producer and a growing exporter of refined petroleum products, domestic fuel pricing remains heavily exposed to international crude benchmarks.

It said that beyond inflation, lower oil prices could create fresh fiscal challenges for the government by reducing projected oil revenues at a time when public finances remain under pressure.

The report concluded that while the ceasefire has delivered welcome relief to global markets and Nigerian consumers, inflation remains above comfort levels, and the risk of renewed geopolitical tensions continues to cast a shadow over the economic outlook.

“The ceasefire offers a narrow window for West Africa to build resilience. Strategic fuel reserves and fertiliser buffer stocks, financed through import levies and distributed through market associations, would protect traders from future shocks.

Regional integration through the African Continental Free Trade Area must be accelerated to develop overland corridors as alternatives to Middle Eastern maritime routes. Investment in solar and off-grid energy is no longer a luxury but a commercial necessity.

The underlying vulnerabilities are unchanged: import dependence, thin fiscal buffers and exposure to chokepoints beyond West African control. The ceasefire is a diplomatic achievement, but the structural realignment of global trade that the war accelerated will persist. Another shock will come”, it said.