Nigeria’s benchmark interest rate is expected to decline by 3% in 2025, as analysts project a shift towards more accommodative monetary policies in response to improving macroeconomic conditions.
The outlook follows a sustained disinflation trend and an absence of major economic shocks, prompting analysts to predict a steady moderation in Nigeria’s rebased consumer price index (CPI) throughout the remainder of the year.
Amid an easing inflationary environment, economists anticipate that the federal government will abandon its strict contractionary approach, bringing an end to the high double-digit interest rates that have persisted in recent years.
Historically elevated interest rates were implemented to curb rampant inflation, but these measures also disincentivized investments in the real sector, shifting focus from productive enterprise to passive portfolio investments. As a result, sectors reliant on consumer spending, especially fast-moving consumer goods (FMCG), have faced sharp contractions in production due to reduced demand.
The enduring pressure from both high inflation and exchange rate volatility has placed considerable strain on corporate operations, while consumers continue to grapple with diminished purchasing power.
Nigeria’s economy, struggling to maintain pace with population growth, has left millions in multidimensional poverty, prompting analysts to call for monetary policy easing in the face of gradual recovery.
In 2024, the Central Bank of Nigeria (CBN) aggressively raised interest rates by a cumulative 875 basis points as part of its strategy to rein in inflation and stabilize the naira. However, the CBN’s Monetary Policy Committee (MPC) held the Monetary Policy Rate (MPR) steady at 27.50% during both its February and May meetings in 2025, signaling a cautious pause.
Analysts from Anchoria Investment & Securities noted that the MPC’s conservative stance was largely influenced by a desire for more clarity regarding the sustainability of the current disinflation trend and naira stabilization.
Despite a dip in headline inflation—supported by the CPI rebasing in January 2025—the committee remained cautious, citing slow progress in reducing core inflation, global macroeconomic uncertainties, and potential capital outflows from tightening in advanced economies.
However, sentiment among market analysts has shifted in favor of monetary easing. Improved foreign exchange liquidity, relatively stable global energy prices, and a modest recovery in economic activity have all contributed to a more optimistic forecast.
Anchoria projected a 300-basis-point reduction in the MPR to 25.50% by the end of 2025, contingent on continued disinflation and naira stability. The firm also suggested the MPC may narrow the asymmetric corridor and consider lowering the cash reserve ratio to inject additional liquidity into the banking system.
Still, Anchoria cautioned that the pace and scope of any rate cuts will be measured. The committee is expected to weigh the need for growth stimulation against preserving real positive returns for investors, especially in light of persistent price rigidity and external economic risks.
