MPC May Cut Rates as Inflation Declines for Fifth Consecutive Month
Analysts expect the Central Bank of Nigeria’s Monetary Policy Committee (MPC) to consider its first interest rate cut in years when it begins its meeting today (Monday), amid sustained disinflation and stronger macroeconomic indicators.
Nigeria’s headline inflation eased to 20.12 per cent in August 2025, down from 21.88 per cent in July, according to the National Bureau of Statistics.
Food inflation also moderated, marking the fifth consecutive month of declines and bolstering expectations of a rate cut in the region of 50 to 75 basis points.
If implemented, this would be the first rate cut under President Bola Tinubu’s administration and the first since Olayemi Cardoso assumed office as CBN Governor in September 2023.
At its last adjustment before Tinubu took office in May 2023, the MPC raised the Monetary Policy Rate to 18.5 per cent to tame soaring inflation.
Rates were subsequently increased to 27.50 per cent through a series of hikes in 2024, with the committee holding steady so far in 2025.
In a weekly market update, Afrinvest analysts argued that Nigeria’s domestic conditions “appear increasingly supportive of a rate cut,” citing:
The Stanbic IBTC PMI climbing to a four-month high of 54.2 in August, external reserves rising to $40.2bn, the strongest since 2019, a 2.5 per cent appreciation of the naira so far this year, colre inflation falling to a 2025 low of 20.3 per cent, slower money supply growth, averaging 19.3 per cent compared with 63.8 per cent in 2024.
“Against this backdrop of favourable price dynamics, firm business expectations and positive external sector dynamics, we consider the macro environment ripe for a rate cut,” Afrinvest said, while warning that global reinflation risks, geopolitical tensions, and oil price volatility may limit the easing to 50–75 bps.
Analysts at Cowry Asset Management also predicted a cautious approach. They noted that while disinflation provides “a window for policy flexibility,” lingering risks from foreign exchange pass-through, food supply bottlenecks and global oil price movements mean the MPC may opt for a symbolic cut rather than an aggressive policy shift.
Similarly, Meristem Securities flagged concerns over foreign portfolio inflows, highlighting a new circular from the Federal Inland Revenue Service mandating strict compliance with withholding tax rules on interest from short-term securities.
Analysts agree that any rate cut could reinforce bullish sentiment in the fixed-income market, with equities expected to post modest gains depending on sectoral earnings outlooks.
