Nigeria’s central bank is expected to keep its benchmark interest rate steady at 27.5% on Thursday, against the aggressive tightening it has been practicing since 2022.
A Bloomberg poll of nine economists showed that seven expect the Central Bank of Nigeria (CBN) to hold rates steady, following a drop in annual inflation from 34.8% in December under the old methodology to 24.5% in January under the new system.
The shift in data has complicated monetary policy decisions as authorities assess the actual inflationary pressures in the economy.
The CBN has raised rates by a cumulative 16 percentage points since 2022 in an effort to rein in soaring inflation and stabilize the naira, which has lost 70% of its value against the dollar following currency reforms in 2023.
The tightening cycle gained momentum when Governor Olayemi Cardoso took office in September 2023, with policymakers prioritizing currency stability and investor confidence.
“Nigeria’s rates had become sufficiently restrictive to promote confidence and stability in the naira,” said James Marshall, senior portfolio manager at ProMeritum Investment Management.
Despite the improved inflation numbers, analysts caution that the slowdown may be more of a structural adjustment than an actual easing of price pressures.
“It’s hard to decipher what the trend of inflation is currently,” Citigroup analyst Katie Kironde wrote in a note. The new data represents a “structural level adjustment,” she added.
With inflation appearing to slow under the revised methodology, market analysts are now considering the possibility of rate cuts later in the year.
Bloomberg Africa economist Yvonne Mhango expects the CBN to hold rates steady for now but sees “scope for rate cuts as soon as the third quarter of 2025.”
The recent policy measures have helped stabilize the foreign exchange market, with the naira trading between 1,470 and 1,550 per dollar since early December.
However, concerns remain over the sustainability of the current inflation trajectory and whether additional monetary interventions will be required in the months ahead.
As the CBN meets today, policymakers are expected to signal a cautious approach, balancing inflation control with economic growth considerations while keeping a close watch on exchange rate dynamics and external market pressures.
