Governor Cardoso Announces No Change to Central Bank’s 27.5% Interest Rate Amid Declining Inflation to 24.48% in January

Nigeria’s Central Bank Holds Interest Rates Steady Amidst Economic Reforms

ABUJA – Nigeria’s Central Bank made the decision to keep its benchmark interest rate unchanged at 27.50% on Thursday, after a series of six interest rate hikes in 2024. The decision follows positive signs of stability in the foreign exchange market and a gradual reduction in inflation, despite recent economic challenges. The Central Bank’s Monetary Policy Committee (MPC) expressed confidence that the measures taken so far are moving the economy in the right direction.

Economists were divided on what action the Central Bank would take, with some anticipating further hikes, while others predicted a more cautious stance due to the rebased inflation data. January’s inflation reading showed a marked decline to 24.48% year on year, following the rebasing exercise conducted by Nigeria’s National Bureau of Statistics.

Inflation Trends and Economic Outlook

In 2024, the Central Bank of Nigeria implemented a series of interest rate hikes totaling 875 basis points. The goal was to combat inflation, which had hit historic highs last year due to the devaluation of the naira and the removal of fuel subsidies under President Bola Tinubu’s administration.

Central Bank Governor Olayemi Cardoso reassured the public in a press briefing that the Monetary Policy Committee is satisfied with the current state of Nigeria’s macroeconomic indicators. “Inflation is trending down, and the outlook is positive,” Cardoso said. He emphasized that the bank’s target is to eventually bring inflation down to single digits. However, he noted potential inflationary risks, including food prices, which remain volatile due to supply chain disruptions and other domestic challenges.

The Role of Economic Reforms in Stabilizing the Market

The government’s fiscal reforms, including subsidy removal and currency devaluation, have been central to the administration’s plans to improve public finances and foster long-term economic growth. While these measures are aimed at creating a more sustainable and market-driven economy, the growth rate has yet to reach the targeted 6%, despite the policy changes.

A key part of Nigeria’s economic adjustment has been a rebase of its consumer price index (CPI) and gross domestic product (GDP). The rebase exercise has had a significant impact on inflation data, which was adjusted downwards. The Central Bank plans to continue analyzing the new inflation data releases to refine its outlook, and the statistics agency is also expected to release a rebased GDP figure soon.

The last major rebase of Nigeria’s GDP data occurred in 2014, a move that catapulted Nigeria to the position of Africa’s largest economy, surpassing South Africa at the time. However, recent trends indicate a decline in Nigeria’s economic size, partly driven by the depreciation of the naira, which fell sharply under President Tinubu’s reforms. As the currency continues to struggle, Nigeria is once again at risk of falling behind South Africa in terms of economic size.

Key Takeaways on Economic Risks and Market Confidence

Governor Cardoso expressed optimism that confidence is slowly returning to Nigeria’s financial markets, a signal that the Central Bank’s policies are starting to take hold. “As stability is restored, we are in a stronger position to begin moderating interest rates,” Cardoso stated. Market stability remains a key priority for the Central Bank, as it works to support an environment conducive to investment and economic growth.

However, experts continue to caution that Nigeria’s recovery is far from guaranteed. The underlying challenges—such as food inflation, currency volatility, and slow economic growth—remain significant risks that could derail the progress made in stabilizing the economy.

Conclusion: While Nigeria’s Central Bank has expressed optimism about the future, the country’s economic trajectory will depend heavily on continued reform efforts, stabilization of the naira, and the government’s ability to manage inflationary pressures in a sustainable way.