Nigeria’s Rate Cut Signals New Economic Direction as Inflation Eases and Growth Prospects Improve
Nigeria’s economy is showing signs of cautious recovery as the Central Bank of Nigeria (CBN) cuts its benchmark interest rate for the first time in five years, lowering the Monetary Policy Rate from 27.5% to 27%. The decision, led by CBN Governor Olayemi Cardoso, reflects growing confidence that inflationary pressures are finally easing after months of steady decline. Analysts say the modest cut signals a shift from an era of tight monetary policy toward a more balanced approach that prioritizes economic expansion alongside price stability.
After battling record-high inflation driven by subsidy removals, volatile exchange rates, and soaring food prices, Nigeria has recorded consistent disinflation since early 2025. According to the National Bureau of Statistics, headline inflation fell from 24.48% in January to 20.12% in August — the lowest in nearly a year. Cardoso said the rate cut was based on the positive trend, improved harvests, and moderating fuel prices, noting that the goal was to “support recovery without derailing the fight against inflation.”
Still, businesses and manufacturers say the impact will be largely symbolic for now. Borrowing costs remain above 30% for most firms, keeping credit out of reach for small and medium enterprises. Experts like Bukola Bankole of TNP warn that while the move signals a more growth-friendly stance, “real progress will depend on consistent policy, fiscal alignment, and structural reforms.” Manufacturers’ groups have echoed similar sentiments, calling for deeper rate cuts to make industrial financing affordable and boost local production.
The policy easing comes amid broader reforms aimed at restoring macroeconomic stability. Exchange rate unification, banking recapitalization plans, and stronger coordination between fiscal and monetary authorities have begun to reshape Nigeria’s financial landscape. The CBN’s renewed commitment to orthodox policies has also helped restore investor confidence. “Managing disinflation requires alignment between fiscal and monetary sides,” Cardoso noted, underscoring the importance of collaboration to sustain progress.
Meanwhile, the non-oil sector continues to anchor Nigeria’s growth. GDP expanded by 4.23% in the second quarter of 2025, with agriculture, industry, and services showing strong momentum. The World Bank recently upgraded Nigeria’s growth forecast to 4.2% for 2025, citing improved oil output and a more stable naira. However, it cautioned that inflation remains a threat to consumer welfare and investment confidence. For now, Nigeria’s policy easing may be modest, but it marks a potential turning point, signaling the CBN’s readiness to nurture growth while holding the line on inflation.
source: punch