The Central Bank of Nigeria (CBN) is expected to deliver its first interest rate cut since the Covid-19 pandemic as inflation eases, a shift in monetary policy after more than two years of aggressive tightening.
The Monetary Policy Committee (MPC), led by Governor Olayemi Cardoso, will announce its decision on Tuesday in Abuja with most analysts projecting a 50 basis-point reduction from 27.5% to 27%.
The cut, if implemented, will be the first since the MPC embarked on a series of hikes in May 2022, raising the benchmark rate by a cumulative 16 percentage points to combat inflationary pressures.
Nigeria has now joined South Africa, Egypt, and Algeria in considering monetary easing, though it is the last of Africa’s four largest economies to move in that direction.
The anticipated shift comes as inflation slowed for the fifth consecutive month in August, easing to 20%.
The naira has also appreciated by 2.8% against the US dollar since July, supported by stronger foreign exchange flows and improved confidence.
Economists note that additional support for easing comes from rising crude oil output, which has boosted Nigeria’s growth to its fastest pace in four years in the second quarter.
The upcoming harvest season is also expected to ease food price pressures, traditionally one of the biggest drivers of consumer inflation.
Samantha Singh-Jami, research lead for African macroeconomics and strategy at Rand Merchant Bank, projected further reductions ahead. “We continue to forecast a year-end policy rate of 25.5%,” she said.
Global dynamics are also providing room for the CBN to act. With the US Federal Reserve lowering borrowing costs, analysts say a rate cut in Nigeria is unlikely to trigger significant capital outflows.
Michał Jóźwiak, an analyst at Ebury, noted that “inflationary threats are diminishing,” reducing external risks to monetary easing.
However, some institutions remain cautious. Societe Generale has predicted that the MPC will hold rates in September while adjusting its guidance to prepare markets for a formal easing cycle later this year.
“Although the case is getting stronger by the day for the CBN to initiate a rate-cutting cycle, we believe September is too soon,” said Gergely Urmossy, an economist at Societe Generale.
The decision will be closely monitored by investors as Nigeria seeks to balance inflation control with supporting economic recovery.
Any shift toward easing would mark a critical policy inflection after three years of monetary tightening that strained credit conditions but helped to stabilize prices.
The announcement is scheduled for 2 p.m. in Abuja.