As Nigeria’s Central Bank convenes its crucial Monetary Policy Committee meeting this Monday and Tuesday, financial markets are increasingly confident that borrowing costs will be reduced for the first time in months.
The growing consensus reflects improving macroeconomic fundamentals, with inflation showing sustained deceleration and the naira demonstrating remarkable resilience throughout 2025.
Market expectations center around a 50 to 75 basis points reduction, supported by compelling evidence of economic stabilization.
Nigeria’s Stanbic Purchasing Managers Index surged to a four-month peak of 54.2 percent in August, while gross external reserves climbed to $40.2 billion, the highest level recorded since September 2019.
The naira’s impressive appreciation in 2025 has provided additional momentum for rate cut expectations, complemented by core inflation easing to a yearly low of 20.3 percent.
Money supply growth has also moderated significantly, slowing to 19.3 percent from the previous year’s concerning 63.8 percent expansion rate.
Some market watchers project even more substantial cuts between 50 and 100 basis points based on sustained disinflationary pressures.
Economic projections anticipate inflation declining toward 18 percent in September, driven primarily by seasonal harvest cycles and continued naira strengthening.
Nigeria’s headline inflation has demonstrated consistent improvement, declining for five consecutive months to reach 21.12 percent in August from July’s 21.88 percent reading.
Food price pressures have similarly moderated to 21.87 percent, offering much-needed relief to households struggling with diminished purchasing power across Africa’s most populous economy.
The favorable monetary policy environment suggests scope for measured rate reductions, with global monetary easing gaining momentum while trade tensions remain subdued.
Market expectations center on a conservative 50 basis points reduction, emphasizing the need for gradual transitions that balance growth stimulation with ongoing commitments to price and exchange rate stability.
Current inflation rates of 20.12 percent remain substantially above the Central Bank’s target range of 6 to 9 percent, with liquidity injection from federal allocations posing additional downside risks to price stability.