CBN MPC Meets to Decide Nigeria’s Interest Rates Amid Easing Inflation and Rising Growth Prospects
The Central Bank of Nigeria’s (CBN) Monetary Policy Committee (MPC) is meeting this week to decide on the nation’s benchmark interest rate at a time when inflation is cooling, the naira is showing resilience, and the economy is steadily expanding. The high-stakes decision follows months of tight monetary policy and comes amid growing calls from manufacturers and investors for a softer stance to support borrowing and business growth.
Nigeria’s macroeconomic indicators have improved in recent months. Headline inflation fell for the fifth consecutive month to 20.12 percent year-on-year in August, down from 21.88 percent in July, helped by easing food and core prices. Meanwhile, the naira has stabilized at around ₦1,494 per US dollar, backed by rising foreign exchange reserves and stronger oil receipts. GDP growth also accelerated to an estimated 3.90 percent in Q2 2025, driven by higher oil output, a rebound in agriculture, and robust performance in services such as ICT and trade.
Despite these positive signals, the MPC faces pressure from multiple fronts. The Manufacturers Association of Nigeria (MAN) argues that keeping the Monetary Policy Rate (MPR) at the current 27.5 percent has made credit unaffordable for businesses, with lending rates to manufacturers rising above 35 percent. However, CBN Governor Olayemi Cardoso and some MPC members have warned that underlying inflationary pressures, high money supply, and negative real yields still threaten price stability, justifying a cautious approach to any rate cut.
The CBN’s decision also unfolds against a backdrop of global monetary easing. The U.S. Federal Reserve recently trimmed its policy rate to 4.00–4.25 percent for the first time in 2025, while the Bank of England cut rates to 4.00 percent in August. These moves highlight a shift toward looser policy worldwide as major economies confront slower growth and rising unemployment. For Nigeria, lower global rates could ease foreign capital costs and support FX inflows, but ongoing oil price volatility and geopolitical tensions still pose risks.
Many analysts expect the MPC to deliver only a modest rate cut—between 50 and 75 basis points, to signal confidence in the improving macroeconomic environment without undermining hard-won gains on inflation and currency stability. Research firms Afrinvest, Cowry, and Cordros note that structural challenges such as food supply bottlenecks and sticky core inflation still call for prudence. The committee’s decision, due later today, is likely to shape borrowing costs, investor sentiment, and the trajectory of Nigeria’s economic recovery for the rest of 2025.
source: the sun