Analysts are projecting an average rate cut of more than 100 basis points as the Monetary Policy Committee (MPC) begins its final meeting for 2025 today, Monday, continuing into Tuesday, with expectations driven by the steady decline in inflation and exchange rate stability.

The anticipation of a significant policy shift comes as the Central Bank of Nigeria (CBN), in a notice released on Thursday, confirmed that the 303rd MPC meeting will be held over two days in Abuja.

According to the notice published on its website, the meeting is expected to provide committee members with an opportunity to review economic developments and assess policy actions aimed at strengthening monetary and financial stability.

All analysts polled by BusinessDay forecast a rate cut, though with varying projections, citing the slowdown in inflationary pressures and improved exchange rate stability as strong justifications.

Charlie Robertson, author of ‘The Time Travelling Economist,’ said inflation has collapsed in Nigeria because prices rose to unsustainable levels in 2024.

“The central bank has plenty of room to cut interest rates – at least 250 basis points looks justified to me. More transparent inflation data would make interest rate cuts easier,” he said in an emailed response.

Razia Khan, managing director and chief economist for Africa and the Middle East at Standard Chartered Bank, said: “We see a 50bps cut at next week’s meeting to 26 percent,” noting that inflation is finally slowing.

She explained that while both August and September coincide with the harvest season, only September showed a pronounced month-on-month decline in food prices, which helped to pull headline inflation down to 18.0 percent year-on-year.

“We update our Nigeria CPI forecasts to reflect the recent moderation in official releases. We see headline CPI averaging 21.8 percent in 2025 (22.3 percent previously), with a quirky base effect still likely to drive December CPI to over 31.0 percent y/y, from about 14.0 percent in November. However, we now see 16.0 percent average inflation in 2026 (21.2 percent) and 13.6 percent in 2027 (16.4),” she said.

Tilewa Adebajo, chief executive officer of CFG Advisory, expects a rate cut in the region of 150 to 200 basis points. He said the next MPC decision would be a true test of the newly published 16.05 percent inflation figure, stressing that the recent CPI rebasing makes the data more reflective of the prevailing spending patterns but does not mean the cost of living has actually fallen.

He noted that the statistical drop is largely due to changes in the CPI basket, with food weights declining while transportation and healthcare gained more prominence. According to him, many Nigerians still feel that prices of essential items remain high, creating a gap between official figures and lived realities.

Ayokunle Olubunmi, head of Financial Institutions Ratings at Agusto & Co., said he expects further rate cuts as a signal of monetary easing, projecting a reduction of more than 100 basis points.

Similarly, Ayodeji Ebo, managing director and chief business officer at Optimus by Afrinvest, anticipates a 25- to 50-basis point cut, supported by the downward inflation trend and relative exchange rate stability.

Analysts at United Capital Research also expect the MPC to deliver an additional rate cut of between 0.5 percent and one percent at the November meeting and possibly reduce the Cash Reserve Requirement (CRR) for commercial banks to 40 percent, representing a five percent cut.

They believe such measures would demonstrate confidence in Nigeria’s ongoing disinflationary trend and the stability of external reserves, while also supporting inclusive GDP growth and strengthening policy credibility.

Funmi Adebowale, head of Research at Parthian Securities, said moderating inflation and sustained foreign exchange stability are creating some room for monetary easing.

She explained that even though inflation has eased to 16 percent, it remains far above the CBN’s target band of six to nine percent, which limits the MPC’s ability to implement any aggressive rate cuts. She also noted that investor sentiment is still fragile due to lingering concerns over the capital gains tax (CGT), which raises the possibility of capital flow reversals if monetary policy becomes too accommodative.

She added that with pre-election sensitivities increasing the need to maintain market stability, the Committee is expected to adopt a cautious approach. As a result, the MPC is likely to opt for a moderate rate cut in the region of 50 to 100 basis points. (BusinessDay)

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