The Central Bank of Nigeria is highly likely to raise its benchmark interest rate, the Monetary Policy Rate, during the second half of 2026 as liquidity pressures build ahead of the 2027 general elections.

This warning was issued on Wednesday by renowned capital market economist Prof Uche Uwaleke during the Arthur Steven Asset Management mid-year review webinar titled “Mid-Year Macroeconomic Review & Outlook for H2 2026”.

Uwaleke highlighted that historical data points towards a surge in liquidity during the penultimate year leading up to national elections, which typically forces the central bank’s hand.

He said, “The year 2026 is a penultimate election year, and the preponderance of the historical evidence is that inflation is usually slightly higher, caused by pre-election spending. If inflation is demand-driven, as a result of money supply, of course, you will expect that the central bank will hike the interest rate.”

According to him, a further rate hike would create a divergence in the financial markets, redirecting capital flows away from equities.

“If the interest rate is further increased, the impact on the equities segment would be negative. There is an inverse relationship between the interest rate and the stock market performance.

Of course, the fixed-income market will benefit once there is a hike in interest rates,” Uwaleke said.

While policy tightening looms, the economist pointed out that the CBN’s final decision is not set in stone and will largely depend on fiscal discipline and the behaviour of the political class.

“If politicians are disciplined regarding currency substitution, the CBN may not consider increasing its interest rate,” Uwaleke said, though he still advised market participants to remain defensive.

He added, “If an investor is going to rebalance on account of actions of policymakers, then that would mean rebalancing in favour of fixed-income in order to take advantage of the high yield.”

Adding to the macroeconomic outlook, the Director-General of the Securities and Exchange Commission, Dr Emomotimi Agama, delivered a goodwill message emphasising ongoing regulatory efforts to boost foreign investor confidence.

Agama said, “The capital market community has engaged with foreign investors to address FTSE Russell, a global institutional investor and custodian, to address concerns over Nigeria’s T+1 settlement.”

This, he explained, was part of active reforms to keep Nigeria aligned with international trading standards.

Concluding the session, the Managing Director/Chief Executive Officer of Arthur Steven Asset Management, Mr Tunde Amolegbe, emphasised that the central bank’s next policy moves will act as the primary anchor for the equities market for the remainder of the year.

He said, “The direction of the CBN on interest rates will heavily influence stock market performance in the second half of 2026. The sustainability of corporate earnings by listed companies, foreign exchange stability, potential Initial Public Offers/new listings, and pre-election dynamics ahead of 2027 are likely to influence the stock market performance in the remaining part of this year.”