Manny Ita –
The Central Bank of Nigeria is expected to resume monetary easing on Tuesday with what could be its largest interest-rate cut since 2020, supported by a stronger naira, moderating inflation and rising foreign-exchange reserves that have improved the outlook for economic growth.
All six economists surveyed by Bloomberg anticipate that Governor Olayemi Cardoso will announce a reduction in the benchmark rate after the Monetary Policy Committee meeting concludes later in Abuja. The current rate stands at 27 percent, after policymakers surprised markets by holding it steady in November.
Analysts differ only on the size of the expected cut. Two economists forecast a 50 basis-point reduction, while the remaining respondents expect a larger 100 basis-point move. A cut of that scale would be the most significant since September 2020, when policymakers eased aggressively during the coronavirus pandemic.
Such a decision would also align Nigeria with a broader trend across Africa, where several central banks have begun lowering borrowing costs as stronger currencies and softer oil prices help contain inflationary pressures.
Nigeria’s inflation rate declined slightly to 15.1 percent in January from 15.2 percent in December, aided by easing food prices. At the same time, the naira has strengthened by more than 6 percent since the beginning of the year after the Central Bank of Nigeria granted bureaux de change operators access to the official foreign-exchange market, improving retail dollar supply and narrowing the gap between official and parallel market rates.
Foreign reserves, currently estimated at about $49 billion, have also strengthened the case for easing. Ayodele Akinwunmi, chief economist at United Capital Plc, said the prevailing conditions support a cautious move. He projected a “modest adjustment of 50 basis points,” noting that a more aggressive cut is unlikely because broad money supply continues to expand.
Governor Cardoso has previously warned about the risks posed by increased government spending ahead of general elections scheduled for early next year, cautioning that excess liquidity in the banking system could undermine price stability if not carefully controlled.
However, Goldman Sachs expects a larger reduction. Andrew Matheny, a senior economist at the firm, noted that yields on the central bank’s open market operations bills — auctions used to manage liquidity among banks and foreign investors — have already fallen by about 150 basis points in recent months. These “tend to lead moves in the policy rate,” he said, suggesting that a cut of similar magnitude would be consistent with recent market trends.
