CBN Halts Interest Rate Hikes Amid Inflation Slowdown and Naira Strengthening
In a notable shift from its aggressive tightening policies, the Central Bank of Nigeria (CBN) has paused its interest rate hikes, marking the first such decision in over two years. The decision follows a decrease in inflation and a strengthened naira, which has gained momentum against major currencies. This move was made after the country’s inflation rate, which had peaked at a 30-year high of 34.8% in December 2024, slowed down to 24.48% in January 2025, following the rebasing of the Consumer Price Index (CPI).
Governor Olayemi Cardoso, who assumed office with a focus on combating inflation, has made progress with the CBN’s monetary policy stance. Throughout 2024, the CBN raised the benchmark interest rate six times in response to soaring inflation. However, with inflation now decelerating and the naira strengthening, the CBN opted to hold the Monetary Policy Rate (MPR) at 27.5% during its February meeting, reinforcing expectations of economic recovery. In addition, the CBN is prioritizing fiscal sector collaboration, improved liquidity, and transparency in forex operations to maintain stability.
The decision to keep rates unchanged is welcomed by businesses, especially in the real sector, as it is expected to help sustain the naira’s recent gains and ease the cost of borrowing. The CBN’s positive outlook for the economy is underpinned by the anticipated growth in the non-oil sector and a steady increase in domestic oil production, which is expected to strengthen the country’s GDP. With inflationary pressures expected to moderate further, the CBN is optimistic that its current policies will foster long-term stability and attract further foreign investments.
Looking forward, analysts predict that the CBN may adopt a more accommodative stance in late 2025 if inflation continues to moderate. Despite the global economic uncertainties, including the ongoing Russia-Ukraine conflict and potential global trade tensions, the CBN’s strategic approach is aimed at balancing inflation control with economic growth. The strengthening of the naira and improvements in foreign exchange liquidity provide a promising outlook for Nigeria’s macroeconomic environment.
SOURCE: PUNCH