Follow Us on Google
By Chinwendu Obienyi
The Monetary Policy Committee (MPC) of the Central Bank of Nigeria (CBN) is poised to make a critical decision today as it weighs the nation’s interest rate policy against a backdrop of easing inflation, stable exchange rates, and solid economic growth.
The two-day meeting of the committee comes at a pivotal moment for the economy, which is showing early signs of recovery amid global monetary shifts and domestic stability.
However, despite this form of recovery, there have been calls from economic analysts who urged the CBN to review its policy and ease the burden on manufacturers finding it hard to access loans for their businesses.
Back in July, the MPC at its 301st meeting resolved to leave the monetary policy rate (MPR) or interest rate at 27.5 per cent. While acknowledging the committee’s efforts to stabilize key monetary indicators, the Manufacturers Association of Nigeria (MAN) argued that maintaining the current high rate was not sufficient enough to tackle inflation or stimulate productive investment.
According to the association, the prolonged contractionary stance of the CBN has significantly strained manufacturers, adding that lending rates to the sector have ballooned to over 35 per cent.
But, in personal statements seen by Daily Sun, members of the MPC, last week, cautioned that the country remains vulnerable to inflationary and financial risks despite recent signs of easing price pressures, stressing the need for more market-based instruments to strengthen monetary policy transmission and attract investments.
Governor Olayemi Cardoso, who chairs the MPC, said the bank is reviewing its liquidity management framework to ensure monetary stability is achieved without distorting markets.
“The sustained stabilization of monetary conditions naturally calls for a review of our approach to the implementation of our policy stance and the liquidity management framework to ensure effective monetary policy transmission. There is growing evidence of the need for the adoption of more market based instruments to support the development of the yield curve and further promote savings and the stability of the financial system. The availability of these tools will be important for the management of the transition from a high reserve requirement environment without creating market distortions”, Cardoso explained.
He stressed that this was particularly important given the persistently high demand for government securities in the primary debt markets, an indication of high liquidity levels in the financial system.
In evaluating his stance in the context of the foregoing developments and data driven forecasts, Cardoso said that there is enough justification for a sustained tightening of monetary policy.
“The pace of disinflation remains tepid and insufficient to warrant any easing of monetary conditions, and underlying inflation pressures and high stock of money supply call for a firm response before price stability is threatened. The negative real yields obtainable in the market also pose a deterrent to savings and investments in the domestic economy, and our focus must remain on lowering inflation levels further, to improve the attractiveness of local assets”, he stated.
Sharing the same sentiment with Cardoso, Chief Executive Officer, Omapu Associates LLC and a member of the MPC, Aloysius Ordu, reiterated that tight monetary policy will be maintained for as long as necessary to anchor inflation expectations.
“Nigeria is thus not out of the woods yet. I continue to believe that our current tight monetary policy stance remains valid to rein in inflation. There is no such thing as double-digit and stable inflation. Our tightening stance is thus warranted for as long as it takes until inflation expectation is well anchored”, Ordu said.
However, analysts who sent emailed notes to Daily Sun, said they are anticipating a cautious but possibly symbolic cut in the benchmark MPR as the CBN balances the twin goals of supporting growth while anchoring price stability.
According to them, the current macroeconomic environment is ripe for monetary easing. But, recent actions by major central banks underscore a global shift toward monetary easing amid slowing growth and rising unemployment risks. For instance, the U.S. Federal Reserve cut its policy rate by 25bps to 4.00–4.25 per cent, marking its first rate reduction in 2025 after five consecutive meetings with no change.
The Fed’s decision came on the back of increasing concerns over labour market weakness, with unemployment rising to 4.3 per cent year-on-year in August and non-farm payroll growth slowing sharply to 22,000 from 79,000 in July. The Fed also signaled the possibility of two further cuts before year-end, revising its policy rate projection downwards to 3.60 per cent from 3.90 per cent.
Other News
Meanwhile, the Bank of England trimmed its benchmark rate by 25bps to 4.00 per cent in August, citing subdued growth and a weakening labour market, though it held rates steady in September due to inflation risks. The European Central Bank (ECB), in contrast, maintained its key policy rates—deposit: 2.00 per cent, main refinancing: 2.15 per cent, and marginal lending: 2.40 per cent, balancing easing inflation pressures with resilient economic conditions and external uncertainties.
These global trends provide both opportunities and cautionary signals for Nigeria. While international rate cuts may ease foreign capital costs and support FX inflows, global uncertainties, including oil price volatility, still weigh on domestic policy considerations.
As stated earlier, Nigeria’s economy appears to be on an expansionary trajectory, bolstered by both oil and non-oil sector performances. Preliminary estimates suggest Q2 2025 GDP growth of 3.90 per cent year-on-year, up from 3.13 per cent in Q1 2025 and 3.48 per cent in Q2 2024.
The oil sector remains the standout performer, expanding 11.90 per cent y/y thanks to higher crude output of 1.68 million barrels per day (mbpd), increased investment in production infrastructure, and improved pipeline surveillance. Reduced terminal shut-ins also contributed to stronger output, signaling rising energy sector resilience.
Meanwhile, the non-oil sector grew 3.62 per cent year-on-year (y/y), supported largely by a rebound in agriculture, which grew 2.63 per cent y/y after contracting earlier in the year. The manufacturing sector also recorded modest growth of 1.76 per cent y/y, reflecting improved business confidence linked to exchange rate stability, while the services sector expanded 4.10 per cent y/y, driven by robust performance in ICT and trade. However, slower growth in finance and insurance, due to tight monetary policy, slightly moderated overall expansion.
For the full year, economists project Nigeria’s 2025 GDP growth to average 3.50 per cent y/y, up slightly from 3.30 per cent in 2024.
A key consideration for the MPC is headline inflation, which eased for the fifth consecutive month in August, declining sharply to 20.12 per cent y/y from 21.88 per cent in July. This 176bps decline was driven by softer price pressures in both food (21.87 per cent y/y) and core items (20.33 per cent y/y).
Another key consideration for the Committee would be the naira. The naira’s stability has been bolstered by robust foreign exchange inflows and rising reserves, providing a cushion against potential market volatility. Total inflows into the NFEM market in August amounted to $3.37 billion, slightly below July’s $3.83 billion but significantly above the 2024 average of $2.51 billion.
While foreign inflows declined 28.1 per cent to $1.26 billion, local inflows rose marginally by 1.5 per cent to $2.11 billion, reflecting improved domestic liquidity and investor confidence.
The nation’s external reserves also strengthened, reaching $41.89 billion as of September 16, a 2.5 per cent year-to-date increase, supported by higher oil receipts, steady diaspora remittances, and reduced CBN FX interventions. The naira traded at N1,494/$1 on September 18, after appreciating from N1,532.87/$1 in August, signaling a resilient currency amidst global uncertainties.
Experts’ views
Economic analysts have predicted a measured rate cut of 50–75bps, reflecting cautious optimism and a desire to signal confidence in the improving macroeconomic environment without undermining hard-won price stability.
Investment research based firm, Afrinvest feels that against the backdrop of favourable price dynamics, firm business expectations, and positive external sector developments, the stage is set for a potential rate cut
“There is cause for caution that global risks, including potential reinflation, geopolitical volatility, and energy market shocks, could limit the Committee to a 50–75 basis points (bps) reduction,” it said.
Similarly, analysts at Cowry Research observed that while inflation moderation and a firmer naira provide room for flexibility, structural bottlenecks such as FX pass-through, persistent food supply constraints, and the stickiness of core inflation suggest the MPC may act cautiously.
“A symbolic rate cut could signal confidence in the disinflationary trend, but residual risks require a measured approach,” they said.
For their part, analysts at Cordros Research said they also expect a 50bps cut, viewing the MPC’s next step as part of a gradual transition toward easing monetary conditions, reflecting improved domestic stability while maintaining a commitment to price and exchange rate stability.
