Nigeria Central Bank Seen Pausing Aggressive Rate-Hike Campaign
Nigeria’s central bank will probably hold interest rates steady later on Thursday, pausing an aggressive tightening cycle after inflation slowed sharply following a revision to how the data is calculated.
Seven of nine economists polled by Bloomberg forecast that policymakers would keep rates unchanged at 27.5% after digesting a decline in annual inflation in January inflation to 24.5%. That compares with 34.8% in December calculated by the old method.
“Nigeria’s rates had become sufficiently restrictive to promote confidence and stability in the naira,” said James Marshall, senior portfolio manager at ProMeritum Investment Management.
The Central Bank of Nigeria has raised rates by a cumulative 16 percentage points since 2022 to cool decades-high inflation and steady the naira, which has depreciated 70% against the dollar following currency reforms in 2023.
Bloomberg’s Africa economist Yvonne Mhango expects the bank to stand pat but sees “scope for rate cuts as soon as the third quarter of 2025.”
The tightening campaign, which picked up pace when Governor Olayemi Cardoso took office in September 2023, is beginning to yield results, with the currency trading at a narrow range between 1,470 and 1,550 per dollar since early December.
Still, Cardoso is unlikely to declare victory as “it’s hard to decipher what the trend of inflation is currently,” Citigroup analyst Katie Kironde wrote in a note. The slowdown in inflation is “more of a structural level adjustment,” which would likely make the CBN “err on the side of caution/hawkishness to maintain policy credibility,” she said.
