Nigeria’s central bank delivered a smaller-than-expected 50 basis point interest rate cut on Tuesday, saying risks to the outlook were balanced and expecting inflation to slow further.
The move took the Central Bank of Nigeria’s Monetary Policy Rate to 26.50% (NGCBIR=ECI), slightly above the 26% anticipated by economists polled by Reuters.
“The … decision was premised on a balanced evaluation of risks to the outlook, which suggests that the ongoing disinflation trajectory would continue,” Governor Olayemi Cardoso said at a press conference.
He noted that the delayed effects of previous monetary tightening, sustained exchange rate stability, and improved food supply were helping to bring down inflation.
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According to Reuters, headline inflation slowed to 15.10% year-on-year (NGCPIY=ECI) in January, marking its tenth consecutive monthly decline, though the central bank aims for inflation to fall further into single digits.
David Omojomolo, Africa economist at Capital Economics, said Nigeria’s monetary policy remains very restrictive, leaving significant room for easing later this year.
Capital Economics projects an additional 750 basis points of cuts by year-end, which would bring the policy rate down to 19%.
Since taking office in 2023, President Bola Tinubu has introduced economic reforms to strengthen public finances and stimulate growth.
While these changes have received praise from the World Bank and others, Nigeria continues to face challenges including attacks by criminal gangs and Islamist insurgents, as well as widespread poverty.
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Image Credit: Africa-Press
