Market News

The Central Bank of Nigeria (CBN) may maintain a hawkish monetary stance this year with “elevated interest rate” to shore up the naira and slow new inflationary pressures amid global policy shifts.

“Nigeria’s 2025 monetary policy must maintain tightening to curb inflation, stabilise FX, and restore investor confidence while ensuring liquidity to support growth,” PwC said in its latest report titled ‘Global economic policy changes and implications for Nigeria’.

This new position comes against the backdrop of the recent sweeping tariffs and trade wars triggered by U.S President Donald Trump that shattered the recent stability enjoyed in the currency market, stoking new inflation fears.

The monetary policy committee (MPC) maintained a conservative stance, keeping the MPR at 27.5 percent in February and all key policy rates unchanged, emphasising a cautious stance amid early signs of easing inflation.

Ahead of its 300th MPC meeting in May, the CBN may hold rates steady, especially as an uptick was witnessed in March as prices climbed from 23.18 percent in February to 24.23 on rising food prices and slight increase in petrol prices.

The decision to halt the idea of beginning an easing cycle is also solidified by the slip of the naira by about 5 percent against the greenback so far this month, making it the second-worst currency globally, defying the CBN’s over $200 million injection of FX into the market, according to Bloomberg.

That has ended the recent gains of the local currency which endured steep devaluations in 2023 and 2024 after President Bola Tinubu embarked on bold reforms to allow the naira to be more market driven than its now defunct pegging of the exchange rate.

Despite the change in market dynamics, Nigeria’s macroeconomic stability remains resilient as inflation is expected to decline while volatility in the exchange rate market will stabilise as CBN ramps up measures to drive inflows.

“Inflation is expected to decline to 21.46 percent in 2025 on the back of monetary policy tightening and improving dynamics in Nigeria’s foreign exchange market,” PwC said, aligning with Fitch Ratings projection.

“The exchange rate is expected to remain stable in 2025, supported by CBN Foreign Exchange reforms, which are expected to drive foreign exchange inflows,” the professional services firm added.