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Central Bank of Nigeria to Consider Interest Rate Reduction

Strategic Insights

— 1 min read

Analysts at FBNQUEST Merchant Bank have forecast that the Monetary Policy Committee (MPC), led by Olayemi Cardoso, will lower Nigeria's interest rates at its upcoming meeting. This decision is driven by a decline in inflation, with headline inflation easing for the third consecutive month, and a relatively stable exchange rate. The MPC has kept interest rates unchanged twice this year, but with prices slowing down and the naira stable, a reduction in the Monetary Policy Rate (MPR) is anticipated.

Key Takeaways:

  • The Central Bank of Nigeria's Monetary Policy Committee (MPC) is expected to lower interest rates, citing a decline in inflation and a stable exchange rate.
  • Headline inflation fell to 22.22% in June, down from 22.97% in May, marking the lowest reading since April 2023.
  • The National Bureau of Statistics (NBS) reported consumer prices quickened to 1.68% month-on-month in June, up from 1.53% in the previous month, indicating persistent underlying inflationary pressures.
  • Food prices rose to 21.97% in June, from 21.14% in May, due to disruptions in farming activities in key agricultural regions.
  • Core inflation rose to 22.76% in June, up from 22.28% in May, suggesting sustained underlying price pressures.
  • The Monetary Policy Rate (MPR) has been unchanged twice this year, after being increased by 875 basis points to 27.5% in 2024.
  • Olayemi Cardoso-led MPC will meet next week to consider a reduction in the interest rate, with analysts expecting a decrease of between 25 to 50 basis points.

Statistics:

  • Nigeria's headline inflation rate fell to 22.22% in June, down from 22.97% in May.
  • The Monetary Policy Rate (MPR) has been reduced by 875 basis points since 2024, from an initial 1.5% to 27.5%.
  • Core inflation rose to 22.76% in June, up from 22.28% in May.
  • Food prices rose to 21.97% in June, from 21.14% in May.
  • The exchange rate has remained relatively stable in 2025.

Sources:

  • FBNQUEST Merchant Bank
  • National Bureau of Statistics (NBS)
  • Central Bank of Nigeria (CBN)

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