The Central Bank of Nigeria’s (CBN) inevitable decision to retain its monetary policy rate (MPR) at 26.5% is going to lift the borrowing costs for firms, which will undermine future profit of entities whose finance costs are currently ebbing.
Following its second meeting of 2026 on 19 and 20 May 2026, the Monetary Policy Committee (MPC) voted to retain the Monetary Policy Rate (MPR) at 26.5 percent.
Of course, the monetary policy stance is brought on by recent geopolitical tension in the Middle East as the war between the United States and Iran which led to the closure of Strait of Hormuz (roughly 20 percent of the world’s petroleum and liquefied natural gas (LNG) passes through the strait daily) resulted in higher crude oil price.
Higher energy costs balloon overall consumer prices, transportation costs, and manufacturing costs, a double whammy for Nigeria, a country that was gradually recovering from the painfully transformative policies of the recent administration such as the removal of subsidy on fuel and the unification of the foreign exchange market.
“We believe the cautious policy stance and the elevated short-term rates imply that borrowing costs will likely remain high, keeping interest expenses elevated for firms,” said analysts at Chapel Hill Denham.
Analysts at Chapel Hill said that some corporates may continue to delay large capital expenditure projects or rely more on internal cash flows to fund operations and expansion.
“In the fixed income market, we expect yields to remain around current levels with scope for a gradual moderation at the sign of sustained easing inflationary pressures. Such a development could “strengthen market expectations of a rate cut at the next MPC meeting,” said analysts at Chapel Hill Denham.
Nigeria’s inflation trajectory hit a fresh bump in March 2026, with the Headline Inflation rate climbing to 15.38 percent, a 32-basis-point increase from February’s 15.06 percent, according to data from the National Bureau of Statistics (NBS).
The yield on Nigeria 10Y Bond Yield held steady at 14.96 percent on May 26, 2026. Over the past month, the yield has edged up by 0.01 points, though it remains 4.80 points lower than a year ago, according to over-the-counter interbank yield quotes for this government bond maturity.
NGX 30 firms profit grew 33.81 percent to N3.55 trillion in the first quarter of 2026, from N2.65 trillion as at March 2024, according to data gathered by MoneyCentral.
Interest expenses for listed companies fell by 14.15 percent to N246.31 billion in the first quarter of 2026, compared to N288.09 billion a year earlier, according to data gathered by MoneyCentral.
Despite the war driven inflationary pressures, the market is expected to continue its rally and remain attractive on the expectation of impressive corporate earnings and dividend declaration.
The NGXASI index has returned 58.53 percent year to date (YTD), driven by rallies from bellwether firms.
“While investor sentiment may remain selectively cautious amid unresolved US-Iran tensions, we believe equities will continue to outperform on a risk-adjusted basis, supported by earnings resilience and the lack of a compelling alternative in the fixed income space,’ said analysts at Chapel Hill Denham.
“We believe opportunities remain in fundamentally strong stocks, particularly those with solid earnings outlook and resilient cash flows, such as SEPLAT, ARADEL, ZENITH, GTCO, ETI, ACCESS, MTNN, DANGCEM, NB and NIDF, the analysts summed.
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