As the Monetary Policy Committee (MPC) of the Central Bank of Nigeria (CBN) begins its meeting today, analysts are signaling the start of a cautious easing cycle. The move comes amid sustained disinflation, stabilizing exchange rates, and moderating food prices, creating an environment for potential interest rate reductions.
January’s inflation data showed headline inflation slowing to 15.10% year-on-year, continuing a months-long trend of disinflation. Core and food inflation both showed moderation, while the naira has gained roughly eight per cent against the dollar since the start of the year. These developments have strengthened confidence that price pressures are gradually easing.
Ayokunle Olubunmi, Head of Financial Institutions Ratings at Agusto & Co., said the MPC is likely to cut rates but will proceed carefully to avoid triggering a fresh wave of inflation. “There may be some cuts, likely between 50 and 100 basis points, with minor adjustments to the Cash Reserve Ratio if needed,” he noted. Olubunmi added that upcoming government spending and political activity ahead of elections could influence the Committee’s decisions.
Senior Market Analyst at FXTM, Lukman Otunuga, highlighted that lower food prices and currency stability bolster the case for easing. “The slowdown in inflation, combined with the naira’s appreciation, makes a strong argument for a rate reduction,” he said, emphasizing that the key question is not whether rates will fall, but by how much.
Meristem analysts also expect a dovish stance from the CBN. They believe the Committee will balance support for growth with caution on liquidity risks. “We anticipate the MPC to cut the MPR by 100 basis points to 26%, adjust the asymmetric corridor, and maintain key liquidity and reserve ratios. This reflects confidence that the worst of the inflation cycle may be behind us,” they stated.
source: This day