Economy
MPC to Maintain Status Quo on Policy Variables Despite Falling Market Rates
By Afrinvestor Research
Since we released our Pre-MPC Note last week, two major developments have surfaced in the global and domestic scene with potential impacts on domestic market condition and near term outlook for monetary policy.
Whilst we consider these events important talking points as the Monetary Policy Committee (MPC) convenes next week (tomorrow) to deliberate, our expectation of the outcome of the meeting remains unchanged as we anticipate committee members to overwhelmingly vote to retain policy rates at current levels.
The first major development is the outcome of the US Fed policy meeting which held midweek. Dismissing the deceleration in US inflation rate below the 2.0% target since the start of the year as a “mystery”, the US Fed Chairman, Janet Yellen, guided on one additional rate hike in 2017 and three more in 2018 in addition to measures to begin slowly reducing the Fed’s US$4.5tn balance sheet.
Although the slightly hawkish statement of the US Fed caught many by surprise, markets’ reaction has so far been calm against the backdrop of the strong and synchronized global growth expansion as well as effective use of forward guidance communication by the Fed to guide on a policy path.
Thus, US equity markets, which have been on a tear this year, traded flattish on Wednesday and Thursday, although yields have risen on US bonds and Emerging Market sovereign and corporate Eurobonds. Nonetheless, we do not expect the MPC to respond as the likelihood of a large-scale capital flow reversal from emerging markets remains low as long as the US Fed sticks to its guided gradual tightening path whilst other major central banks’ policy outlook remains broadly accommodative.
Contrarily, we consider the recent developments in the domestic scene more significant to the MPC’s discourse next week. Over the last three weeks, rates have been dropping sharply in the Treasury Bills market in response to possible near term easing of monetary policy as well as reduction in supply of longer dated bills since CBN stopped offering 364-day bills at its OMO auctions.
Consequently, we have observed a bull flattening pattern (i.e. longer term rates falling faster than shorter ones) at primary and secondary market for Treasury Bills as investors aggressively position in longer-dated bills.
At the PMA held mid-week, the 364-day stop rate fell to 17.0%, 152bps lower than the August 30th Auction stop rate, compared to a 15bps and 56bps drop in 91-day and 182-day papers respectively.
As demand increases relative to supply, secondary market rates on T-bills have also declined across tenors, down 134bps M-o-M as of market close today. The bullish sentiment in the fixed income market is also noticeable in the bond market where yields have dropped 74bps on average M-o-M across benchmark bonds to 16.2%. Given market sentiments are often leading indicators of policy rate changes, we expect the MPC to take notice of recent movements in the yield curve.
However, as we noted in our Pre-MPC note last week, we believe MPC would maintain status quo on all rates next week given the need to consolidate gains on stabilizing FX and inflation rates. Our expectations are based on the following considerations:
Price level remains sticky as high base effect thins out: the National Bureau of Statistics (NBS) Inflation report for August released today indicated Headline inflation marginally decelerated 3bps to 16.01% Y-o-Y from 16.04% in July. M-o-M CPI growth have remained elevated since the start of the year against the backdrop of a food price pressure which took Food Inflation to an all-time high of 20.3% in July 2017. With the economy now running out of high base effect driven moderation in headline inflation, our model projects inflation rate will rise for the first time since the start of the year in September. Given supposed price-anchored monetary policy regime, the MPC is not likely to cut benchmark rate in a period of rising inflation expectation.
MPR has become a less effective Monetary Policy Tool: the case for easing via benchmark rate reduction becomes weaker if the current disparity between the benchmark rate and short-term fixed income yields is taken into consideration. Although the recent bullish streak in the fixed income market has narrowed this spread, it is not enough to justify a cut in interest.
While our medium term outlook favours a gradual monetary easing, we believe the stabilization of the FX market is paramount to achieving monetary policy objectives. The FX market, despite improvements recorded so far in the year, is still in a fragile state as the CBN is yet to harmonize all rates at the official market. As such, in the event that a unified rate is not achieved, monetary easing poses a threat for FX stability. Furthermore, the current realities of Nigeria’s budget deficit, suggests the need for the fiscal authorities to continuously fund this disparity which current tightening stance enhances; though at a higher cost to government.
In light of the above, the more rational decision we foresee the MPC making is to maintain status quo and continue to consolidate on gains in the FX market. Hence, we believe the outcome of the 5th MPC meeting would be to; retain the MPR at 14.0%; retain the CRR at 22.5%; retain the Liquidity Ratio at 30.0%; and retain the Asymmetric corridor at +200 and -500 basis points around the MPR.
By Aduragbemi Omiyale
The Stanbic IBTC Bank Nigeria Purchasing Managers’ Index (PMI) for the Nigerian private sector in July 2026 contracted to 52.5 points from 53.4 points in June 2026, a statement made available to Business Post has shown.
This occurred despite the business environment sustaining its growth last month, with an increase in new orders experienced, as inflationary pressures softened, and output and employment modestly rising.
The Head of Equity Research West Africa at Stanbic IBTC Bank, Mr Muyiwa Oni, said the PMI indicated that the private sector recorded its slowest since March 2026, as businesses also increased their input purchasing activity to keep up with current demand requirements and prepare for future workloads.
“Nigerian businesses reported improved customer demand in July while better pricing and new product launches also helped them to capture new orders arising from the increase in demand. These factors helped to keep the private sector activity in an expansionary territory, although this moderated when compared to June,” he was quoted as saying.
It was stated that while input costs increased at their slowest pace in five months, panellists reported higher costs for fuel and raw materials. Selling prices also softened in line with the picture for input costs in July.
Headline inflation eased slightly to 15.91 per cent y/y in June from 15.93 per cent y/y in May, snapping three consecutive months of price increases.
Although July inflation is likely to be higher m/m, it is expected to print lower, likely at 15.72 per cent y/y, primarily driven by favourable base effects from the corresponding period of last year, because there are no expectations of the magnitude of m/m inflation witnessed in July 2025 (1.99 per cent) to materialise this year.
“We retain our 2026 growth forecasts at 4.1 per cent as we see the oil sector growing by 3.45 per cent y/y in 2026, from 8.50 per cent y/y in 2025, while the non-oil sector is likely to grow by 4.11 per cent y/y, from 3.71 per cent y/y in 2025.
“The risks to our outlook include country-wide insecurity which may constrain food production, exchange rate pressures resurfacing, extreme-weather related conditions and higher fertiliser prices impacting crop yield, and a volatile global environment which may affect sentiment and constrain capital flows,” Mr Oni noted.
By Adedapo Adesanya
Sahara Upstream, a Nigeria-focused crude producer, has deployed a new 380,000-barrel tanker to boost exports from the OML 18 block as part of a wider push by domestic operators to invest in infrastructure and lift output and exports for Africa’s biggest oil producer.
The MT D Adesanya, which can hold more than 62,000 cubic metres of crude, will operate alongside the MT D Bayero, receiving crude from shuttle vessels at Bonny Anchorage, one of Nigeria’s main crude export hubs, before transferring it to the FSO Cawthorne storage facility.
Sahara said the tanker would help cut turnaround times, currently about 30 to 48 hours, and support a planned 50 per cent increase in exports from the block’s current level of about 950,000 barrels per month.
The block currently produces about 36,000 barrels per day, according to data from the Nigerian Upstream Petroleum Regulatory Commission (NUPRC), with Sahara targeting output of 60,000 barrels per day.
OML 18 is one of the Niger Delta’s oldest producing assets. It began production in 1970 and contains an estimated 1.5 billion barrels of oil equivalent in reserves.
Shell, Total and Eni sold their combined interests to Eroton in 2015 as part of a broader shift toward domestic ownership in Nigeria’s upstream sector.
This development comes as Sahara Upstream is deepening its exploration and production footprint through Asharami Energy Limited (AEL), its upstream E&P business, which says it is targeting 350,000 barrels of oil per day by 2030 through its subsidiary, Enageed Resources Limited (ERL).
The growth target comes as AEL also marks a major safety milestone, achieving 6 million Lost Time Injury (LTI)-free man-hours in its OML-148 operations — reinforcing the company’s commitment to operational excellence and safety leadership.
According to Asharami Energy, the milestone reflects its ability to execute complex operations safely, in line with Sahara’s Beyond XXX vision, which builds on the group’s 30-year legacy of responsible enterprise while marking its next chapter of impact, innovation, and sustainable growth.
The developments position Sahara Upstream and its subsidiaries among the domestic operators driving increased investment in Nigeria’s oil and gas infrastructure, as the group works to scale up production and exports for Africa’s biggest oil producer.
By Aduragbemi Omiyale
One of the leading energy firms in Nigeria, Aradel Holdings Plc, has expressed its desire to optimise its enlarged portfolio and improve operational efficiency in the second half of 2026.
The company is planning to build on the success it recorded in the first half of the year, where it grew its revenue by 577 per cent to N2.5 trillion from N368.1 billion in H1 2025.
The significant rise in earnings was driven by higher production volumes together with stronger realised crude oil and gas prices, with the average at $90.4/bbl and $2.08/mmscf, respectively.
In the period under review, the Earnings Before Interest, Taxes, Depreciation, and Amortization (EBITDA) increased by 688 per cent to N1.4 trillion from N176.4 billion in the corresponding period of last year, while the operating profit surged by 789 per cent to N1.1 trillion from N118.6 billion due to higher revenue and crude handling income at N149.8 billion, partly offset by underlift cost and general and administrative costs.
The net cash generated from operations was N975.6 billion between January and June 2026 versus N140.8 billion in the same period of 2025, reflecting the cash generation of the enlarged organisation.
The net debt contracted by 70 per cent on a year-to-date basis to N46.5 billion from N475.1 billion as of December 31, 2025.
Aradel, in the period under consideration, improved its post-tax profit by 30 per cent to N191.0 billion from N146.4 billion, a development that impressed its chief executive, Mr Adegbite Falade, who said, “A firmer price environment supported performance, generating net cash from operating activities of N975.6 billion and a closing cash balance of N1.7 trillion.”
“Our enlarged portfolio provides more opportunities to generate stronger cash flow and returns for shareholders and unlocking that potential is our main focus.
“We reaffirm our full year production guidance of 110 – 140 kboepd and remain committed to operating responsibly in a changing energy landscape and to delivering lasting value for our stakeholders,” he stated.
