Benchmark Interest Rate Projected to Fall by 3% in 2025
Nigeria’s monetary policy rate has been projected to fall by 300 basis points in 2025 as the nation’s macroeconomic conditions begin to improve.
Disinflation has persisted, and a slew of analysts have maintained a positive outlook for the rebased consumer price index to ease for the rest of the second half in the absence of significant economic shock.
The Nigerian government is expected to put an end to its contractionary economic policy, with double-digit high interest rates likely to fizzle out in the second half of 2025, some analysts have said.
A high interest rate environment was ushered in following hot red inflation that discoloured the Nigerian economy over the years. Rather than investing in the real sector of the economy, portfolio building has been replaced with productive activities.
Investment in goods and services has slowed down significantly, with some consumer goods sectors scaling back production as a result of poor economic conditions.
Both inflation and the naira exchange rate pressures have forced companies into an edge, while low purchasing power tapers consumers purchases.
It has been a rat race for multi-dimensionally poor Nigerians as the economy circles around with limited growth as against the population surge.
A slew of analysts have formed a consensus that Nigeria is more likely to switch to monetary policy easing as macroeconomic conditions start to improve.
In 2024, the Central Bank of Nigeria (CBN) jerked up the interest rate by 875 basis points (bps), a decision driven by its inflation-fighting mode and hunger to stabilise the exchange rate. The Apex Bank’s Monetary Policy Committee maintained a cautious stance throughout the first half of 2025.
The benchmark interest rate was held steady at 27.50% across two consecutive meetings in February and May. Analysts at investment firm Anchoria Limited expressed the view in a note that the decision was on the back of the committee seeking greater clarity on the sustainability of recent disinflation trends and the durability of naira stability.
Although headline inflation moderated—helped in part by the rebasing of the Consumer Price Index (CPI) in January 2025—the MPC remained vigilant.
“This caution was driven by several factors: limited progress in reducing core inflation, concerns over potential capital outflows due to tightening in advanced economies, and persistent global macroeconomic uncertainties”, Anchoria said.
However, analysts said rate cut has become more like as the macroeconomic landscape is gradually improving. Disinflation is gaining traction, foreign exchange (FX) liquidity has shown signs of recovery, and energy prices have remained relatively stable.
Analysts said these factors—combined with a modest rebound in economic activity—have strengthened expectations for a gradual pivot towards monetary easing in the second half of 2025.
“A measured reduction in the MPR—projected at 300 bps to 25.50% by year-end—is increasingly likely, provided inflation continues to trend downward and FX markets remain relatively stable”. Anchoria said.
In addition to a rate cut, the firm added that the MPC may consider narrowing the asymmetric corridor to reduce interest rate volatility and potentially lowering the cash reserve ratio to inject more liquidity into the banking system.
However, the pace and scale of any policy easing will likely be conservative, Anchoria said, adding that the committee is expected to balance the need to stimulate growth with the imperative of maintaining real positive returns for investors, particularly in the face of ongoing external risks and domestic price stickiness. #Benchmark Interest Rate Projected to Fall by 3% in 2025#
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