Abuja: Nigeria’s Central Bank has reduced its key policy rate by 50 basis points, lowering the Monetary Policy Rate (MPR) to 27%, marking the first rate cut since 2020. The move signals a cautious shift in monetary policy as inflation shows signs of easing, though price pressures remain elevated across the nation.
The decision came as headline inflation fell to 20.12% year-on-year in August, the fifth consecutive month of moderation following a period of persistently high prices. The slowdown in inflation reflects a combination of factors, including the stabilization of the naira, reduced pressure on energy costs, and government measures to manage food prices. Central Bank officials framed the reduction as a balanced approach aimed at sustaining economic growth while keeping inflation on a declining trajectory.
Governor Olayemi Cardoso emphasized that the rate cut was measured, taking into account both domestic economic conditions and external factors that continue to affect Nigeria’s financial landscape. “Our priority is to support economic recovery and ensure inflation continues its downward trend,” she said. “We remain vigilant and will adjust policies as needed to safeguard price stability while encouraging investment.”
Economists had anticipated a slightly larger reduction of 75 basis points, reflecting strong expectations for a faster easing of borrowing costs. The central bank’s more conservative adjustment underscores its commitment to gradual, data-driven policy changes rather than aggressive interventions that could risk destabilizing the financial system.
The reduction in the MPR is expected to lower borrowing costs for businesses and households, potentially stimulating investment and consumption. However, analysts caution that the economy still faces challenges, including volatility in global commodity prices, exchange rate fluctuations, and structural issues that continue to weigh on household purchasing power.
Investors view the policy shift as a signal of increasing confidence in the inflation outlook, but the central bank must maintain a careful balance to avoid rekindling price pressures. Nigeria’s economic recovery, already fragile, depends on sustained coordination between monetary and fiscal authorities, along with measures to strengthen the resilience of key sectors.
The 50-basis-point cut represents a cautious but meaningful step in Nigeria’s ongoing efforts to stabilize its economy, support growth, and ensure that inflationary pressures continue to ease in the months ahead.