Market News

Tony Chukwunyem

After six rate hikes last year, the decision taken by the Central Bank of Nigeria’s (CBN) Monetary Policy Committee (MPC), at its meeting in February, to leave the benchmark interest rate unchanged, as well as key forex measures introduced by the apex bank, were some of the major developments in the money market in Q1’25, writes Tony Chukwunyem

In his address at the annual bankers’ dinner organised by the Chartered Institute of Bankers of Nigeria (CIBN) in November, which saw him providing a review of the economy and financial system last year, as well as setting some key projections for 2025, Governor of the Central Bank of Nigeria (CBN), Mr. Olayemi Cardoso, said that the apex bank’s tight monetary policy stance was beginning to rein in surging inflation and that the regulator was expecting, “a downward trend in 2025.”

He stated that although inflation remained high, despite the CBN raising the benchmark interest rate-the Monetary Policy Rate (MPR) by 875 basis points to 27.5 per cent in 2024, the apex bank was optimistic that its measures would yield the desired result this year, “particularly given that the full effects of monetary policy typically take 6-9 months to impact the consumer sector.”

Furthermore, Cardoso o said that the stability in the foreign exchange market recorded in the last quarter of 2024, occasioned by the CBN’s policy measures, was likely to continue this year.

Apart from the CBN, respected economists, such as the Chief Executive Officer of Financial Derivatives Company (FDC), Mr. Bismarck Rewane, also said they expected the country’s inflation rate to begin decelerating in 2025.

In a presentation in December, Rewane stated that while the country’s inflation was still high, “the factors that caused it are easing and further inflationary pressure might be subsiding.”

“Nigeria’s inflation rate will broadly decline in the medium term averaging 27.7 per cent in 2025. A broad disinflation trend is expected to accelerate in the longer term underpinned by freer trade policy (and) greater stability in the foreign exchange market,” the FDC boss said.

Rebasing of CPI

In fact, prospects for lower inflation this year brightened when the National Bureau of Statistics (NBS), in conjunction with the Nigerian Economic Summit Group (NESG), announced, on January 10, that they planned to rebase both the Gross Domestic Product (GDP) and the Consumer Price Index (CPI).

They said that the move was aimed at aligning economic statistics with current realities, adding that the year 2019 had been chosen as the new base year for the GDP, replacing the previous base year of 2010, while 2024 would be the new base year for the CPI, replacing the former base year of 2009.

Following the announcement, the consensus among analysts was that the methodology that the NBS said it was using to rebase the CPI was likely to result in a decline in inflation.

The analysts were proved right because when the NBS released the rebased CPI data for January, the report showed that the headline inflation rate fell sharply from 34.80 per cent in December 2024 to 24.48 per cent in January 2025.

February MPC meeting

Interestingly, the rebased CPI data was released about twenty four hours before the CBN’s Monetary Policy Committee (MPC) held its first meeting of the year.

In line with analysts’ expectations, the MPC voted unanimously to not only leave the benchmark interest rate- the Monetary Policy Rate (MPR) unchanged at 27.50 per cent, but also to retain the other key parameters such as the asymmetric corridor, the Cash Reserve Ratio (CRR) and the liquidity ratio.

In the communiqué issued at the end of the meeting, the MPC said that while inflation was showing early signs of easing, it was “too early to start considering rate cuts.”

The communiqué also said that the decision to maintain rates was driven by “recent macroeconomic indicators that suggest improved market stability”, particularly in the foreign exchange market and inflation trends.

It stated: “The Committee noted that core inflation remains a concern, even as recent data indicates a slowing trajectory. Food prices continue to exert upward pressure, and thus, premature monetary easing could reverse recent gains.”

Speaking to reporters during the press conference held at the end of the meeting, Cardoso said that the MPC was satisfied by recent macroeconomic developments, which he said, were expected to help price dynamics.

“Inflation is trending down, and it’s looking positive,” Cardoso said, adding that the aim was to bring inflation down to single digits.