The Central Bank of Nigeria’s monetary policy is increasingly being shaped by global geopolitical tensions, as the Middle East crisis complicates inflation management, delays interest rate cuts and heightens risks to exchange rate stability and economic growth.For the CBN, the ongoing Middle East crisis is not a distant geopolitical event. It is a direct threat to Nigeria’s inflation outlook, exchange rate stability, production costs and household purchasing power. That link was central to the decision of the Monetary Policy Committee to retain the Monetary Policy Rate at 26.5 per cent after its 306th meeting in Abuja on 20 and 21 July 2026. The committee also retained the standing facilities corridor around the MPR at plus 50 and minus 450 basis points, while maintaining the Cash Reserve Requirement at 45 per cent for deposit money banks, 16 per cent for merchant banks and 75 per cent for non-Treasury Single Account public sector deposits. Reading the communiqué, the CBN Governor, Olayemi Cardoso, said the committee’s decision followed a detailed assessment of risks confronting the Nigerian economy. Although inflation declined marginally in June, he said uncertainty had increased because of renewed hostilities in the Middle East and their potential effects on international energy prices.
In view of the evolving developments, maintaining a cautious monetary policy stance remains appropriate,” Cardoso said.
The concern is understandable. The Strait of Hormuz is one of the most important energy transit routes in the world. Data from the United States Energy Information Administration show that oil flows through the strait averaged 20.9 million barrels per day in the first half of 2025, equivalent to about 20 per cent of global petroleum liquids consumption. Any disruption to that route can quickly reduce supply, increase freight and insurance costs and lift crude oil and refined product prices across markets.