Nigeria’s Central Bank is widely anticipated to keep interest rates unchanged later this week, pausing its aggressive tightening cycle after inflation showed signs of cooling. Economists surveyed by Bloomberg are forecasting that the central bank will maintain the current rate of 27.5% following a significant drop in annual inflation in January to 24.5%, down from 34.8% in December—thanks in part to a revision in the way inflation data is calculated.
James Marshall, Senior Portfolio Manager at ProMeritum Investment Management, noted that Nigeria’s current interest rates are “sufficiently restrictive” to bolster confidence and stabilize the naira, the nation’s currency.
Since 2022, the Central Bank of Nigeria has implemented a series of rate hikes totaling 16 percentage points to combat inflation, which reached multi-decade highs, and to stabilize the naira. The currency has depreciated by 70% against the US dollar following a series of currency reforms in 2023.
Yvonne Mhango, Africa Economist, also expects the central bank to keep rates steady for now but suggests there could be room for rate cuts as early as the third quarter of 2025.
The tightening cycle, which accelerated following Governor Olayemi Cardoso’s appointment in September 2023, appears to be yielding results. The naira has been trading within a narrow range of 1,470 to 1,550 per dollar since early December.
However, analysts caution that the Central Bank is unlikely to declare success just yet. Citigroup’s Katie Kironde argued in a recent note that while inflation has slowed, the shift may represent more of a “structural level adjustment.” As a result, the Central Bank of Nigeria is expected to remain cautious in its approach, maintaining a hawkish stance to preserve policy credibility amid ongoing uncertainties surrounding inflation trends.
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