Interest Rate: CBN Anticipates to Prioritise Growth with 50bps Cut
Analysts anticipate that the Central Bank of Nigeria (CBN) will prioritise economic growth over price stability with a 50 basis point reduction in benchmark interest as the monetary policy committee (MPC) is scheduled to meet this week.
Consensus on rates direction is mixed, with deliberations taking place in an environment of easing inflation, a firmer Naira, and a shifting global policy landscape where the U.S.
Inflation is declining, and the naira has maintained an uptrend against the US dollar due to foreign investors’ confidence in the economy and financial market.
The CBN is facing a dilemma between growth and price stability, as the interest rate has been kept at 27.50% to anchor inflation.Gross domestic product (GDP) growth rate has remained within a tight range, in contrast to the plan to boost the Nigerian economy to $1 trillion.
A slew of economists told MarketForces Africa that a lower rate suggests expansionary government policy which would encourage the private sector to ramp up borrowing, expand capability, and drive real sector economic growth.
A higher interest rate environment is a growth-starved policy that discourages private sector growth due to higher borrowing costs – resulting in reduced operational capacity.
“We expect the MPC to begin reassessing its current policy stance, supported by sustained improvements in key indicators (inflation and the exchange rate) and a more positive outlook.
“The Committee is also likely to consider recent shifts globally to monetary easing, following the US Fed’s rate cut and the prospect of further policy accommodation in near future periods.
“This should be positive for capital flows into emerging and frontier markets, including Nigeria, adding an additional layer of support to engender continued exchange rate stability.
“That said, we expect the Committee to remain cautious, balancing growth-supportive measures with its core mandate of maintaining price stability.
“Specifically, we believe any easing will be carefully calibrated in an effort to ensure that interest rates remain competitive enough to continue to attract capital inflows and anchor inflation expectations.
“Accordingly, we project a 50bps cut in the Monetary Policy Rate (MPR) to 27.00% … while maintaining other parameters”, Cordros Capital Limited said in its pre-MPC review.
US Federal Reserve cut rate by 25 basis points amidst weak labour and macroeconomic data. However, Bank of England kept benchmark rate at 4%.
“The key question, however, is the extent of headroom available to the MPC to adjust its policy stance from the current benchmark rate of 27.50%”, Cowry Asset Limited wrote.
The firm said while the disinflation momentum provides a window for policy flexibility, residual risks from FX pass-through, food supply bottlenecks, and global oil price volatility suggest the committee may tread cautiously in balancing the goals of anchoring inflation expectations with supporting growth.
With month-on-month inflation readings still elevated, the Committee has, so far in 2025, opted for caution—holding the benchmark rate steady at 27.50% to anchor expectations.
Cowry Asset Limited stated that the sharp moderation in headline inflation in August could provide room for a potential policy shift, possibly even a symbolic rate cut to signal confidence in the disinflation trend.
Still, Cowry Research thinks the MPC may tread carefully, given lingering risks from FX pass-through, structural food supply pressures, and the sticky trajectory of core inflation.
“In our view, the committee is more likely to strike a balanced tone—acknowledging the easing price pressures while keeping its guard up against residual risks to price stability”
Nigeria’s disinflation trend that saw headline inflation ease to 20.12% in August 2025, largely reflecting favourable base effects and moderated price pressures across key food and non-food categories.
The moderation marks a continuation of the gradual slowdown witnessed in recent months, with support also coming from improved FX liquidity and relative currency stability.
The latest Consumer Price Index (CPI) report from the National Bureau of Statistics (NBS) revealed another moderation in Nigeria’s headline inflation, which eased to 20.12% year on-year in August 2025 from 21.88% in July 2025.
The August print also represents the lowest annual inflation rate since April 2023, reflecting the cumulative impact of a relatively stable exchange rate regime, softening energy costs, and favourable base effects following the CPI rebasing exercise.
Building on the encouraging downtrend inflation, month-on-month inflation slowed to 0.74% in August from 1.99% in July, underscoring the volatility in short-term price dynamics.
The moderation was largely offset by renewed pressures within the food basket, which remains the dominant driver of headline inflation. On a year-on-year basis, both food and core indices eased, reinforcing the broader disinflationary trend. AIICO Insurance Targets N19.55 billion Profit for FY2025
