Nigeria’s central bank held its benchmark interest rate steady at 27.50% on Thursday, opting for stability after the rebasing of the consumer price index (CPI). The decision signals a cautious approach by Governor Olayemi Cardoso, who is balancing a need to lower inflation with the need to support an economy that is gradually winning back investor confidence.
The Monetary Policy Committee (MPC) voted unanimously to hold rates and said it assessed recent macroeconomic developments, including exchange rate stability and a gradual slowdown in fuel price increases, and decided that holding rates steady was the best course of action.
“The committee noted the recent rebasing of the Consumer Price Index (CPI) by the National Bureau of Statistics (NBS), which adjusted the weighting of items in the consumption basket to reflect current spending patterns,” said CBN Governor Olayemi Cardoso.
The rebasing, which updates the components used to measure inflation, lowered reported inflation rates, even though underlying price pressures remain high. Nigeria’s inflation stood at 34.48% in January before rebasing, but the updated methodology adjusted it to 24.48%.
The decision to hold rates was widely anticipated by analysts, who argued that further tightening could stifle business activity, while a premature cut might worsen inflationary pressures.
“Inflation is at an inflection point but could pick up again in a few months. The MPC will likely wait for at least three more months to assess the rebased numbers before making a major move,” said Basil Abia, an economist at Veriv Africa.
Since the start of 2024, the CBN has raised rates in an aggressive attempt to rein in inflation and stabilize the naira. This latest decision suggests the central bank is pausing to evaluate the impact of those hikes rather than committing to further tightening.
Despite the reported slowdown in inflation, businesses and consumers still face rising costs, particularly for food and imported goods.
With the next MPC meeting scheduled for May 2025, investors will be watching for signals on whether the CBN maintains its hawkish stance or shifts toward easing if inflation shows signs of further moderation.
