CBN Flags Election Spending, Oil Shocks as Inflation Risks

The Central Bank of Nigeria (CBN) has warned that rising election-related spending and potential oil price shocks could pose upside risks to Nigeria’s inflation outlook, even as headline inflation continues its downward trajectory.

Governor Olayemi Cardoso issued the caution during a question-and-answer session with journalists following the 304th Monetary Policy Committee (MPC) meeting in Abuja.

While expressing optimism over sustained macroeconomic improvements including moderating inflation, exchange rate stability, and strong external reserves, Cardoso stressed that fiscal discipline would be critical in preserving recent gains.

“Election-related spending, if not properly contained, could destabilise the stability we have accomplished,” the Governor said, noting that fiscal expansion remains a key variable in the inflation outlook.

Beyond domestic fiscal pressures, the CBN flagged oil market volatility as a major external vulnerability.

Cardoso acknowledged that oil prices remain subject to global geopolitical tensions and market dynamics beyond Nigeria’s control. “Nobody has a crystal ball,” he remarked, adding that sudden external shocks could alter projections and impact reserves, exchange rate stability, and inflation expectations.

Oil remains Nigeria’s dominant export earner, making public finances and foreign exchange inflows sensitive to price fluctuations in the global energy market.

The caution comes as inflation eased to 15.10 per cent in January 2026, marking the eleventh consecutive month of year-on-year decline a sharp drop from levels above 34 per cent at the peak of the inflation cycle.

The MPC attributed the sustained disinflation to tight monetary policy, improved foreign exchange liquidity, enhanced food supply conditions, and stronger external sector performance.

Cardoso said the apex bank’s difficult but necessary tightening measures had begun to yield results, particularly in stabilising the foreign exchange market and anchoring inflation expectations.

However, he emphasised that sustaining the downward inflation trajectory would require coordination beyond monetary authorities.

“This is not something the Central Bank alone can achieve, all stakeholders must work collaboratively to ensure that the gains we have achieved are sustained,”he said.

The Governor reiterated that policy consistency remains central to sustaining investor confidence and macroeconomic stability.

He stressed that avoiding “policy somersaults” and maintaining discipline across fiscal and monetary authorities would be essential to keeping inflation on a downward path.

Economic Confidential had reported that the MPC reduced the Monetary Policy Rate by 50 basis points to 26.5 per cent, describing the move as a calibrated easing consistent with prevailing inflation dynamics.

Despite the positive outlook, the CBN maintained that caution remains its guiding principle.

“Caution is our watchword,” Cardoso said, noting that the Bank would continue to adopt a conservative and evidence-based approach to safeguard price stability and protect the broader economy.

With inflation moderating, reserves strengthening, and economic activity expanding, Nigeria’s macroeconomic outlook appears to be improving.

Yet, as the CBN has signalled, fiscal pressures and external oil shocks remain key risk factors that could test the durability of the country’s disinflation gains in the months ahead.