Falling Inflation Sparks Rate-Cut Speculation as CBN’s MPC Meets in Abuja
Nigeria’s steadily easing inflation is fuelling expectations that the Central Bank of Nigeria’s (CBN) Monetary Policy Committee (MPC) may finally cut interest rates when it begins its meeting today in Abuja. Analysts widely forecast a reduction of between 50 and 75 basis points, a move that would mark the first benchmark rate cut since President Bola Tinubu took office and appointed Olayemi Cardoso as CBN Governor in September 2023.
According to the National Bureau of Statistics, headline inflation slowed for the fifth consecutive month to 20.12% in August 2025 from 21.88% in July, while food inflation also eased on a year-on-year basis. This disinflationary trend, combined with a stronger naira and rising foreign reserves, has raised hopes that monetary policy could finally shift from a prolonged tightening stance to one more supportive of growth.
The MPC last raised the benchmark interest rate to 18.5% in May 2023 before further hikes took it to 18.75% later that year. In 2024, the rate climbed by over 800 basis points to combat soaring inflation, and throughout 2025, it has been held steady at 27.50%. Analysts at Afrinvest and Cowry Asset point to similar rate cuts in other markets, including the U.S. Federal Reserve’s 25-basis-point reduction and Africa’s dovish trend, as reasons why Nigeria’s central bank may consider following suit.
Local conditions also appear favourable. Stanbic IBTC’s Purchasing Managers’ Index rose to a four-month high of 54.2 in August, gross external reserves increased to $40.2 billion, the highest since 2019, and core inflation dropped to a 2025 low of 20.3%. Money supply growth has also slowed sharply, from 63.8% in 2024 to 19.3% this year. Analysts say these positive indicators create room for a symbolic or substantive rate cut to signal confidence in Nigeria’s economic trajectory.
However, risks remain. Global reinflation, energy market volatility, and foreign exchange pass-through could still weigh on prices. New tax rules on short-term securities have already unsettled some foreign portfolio investors, weakening the naira temporarily. As a result, economists expect the MPC to take a balanced approach, possibly cutting rates modestly while maintaining a vigilant stance to preserve investor confidence and price stability.
source: punch