Nigeria’s Central Bank Holds Benchmark Rate at 27% as Inflation Slows
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Nigeria’s central bank left its benchmark interest rate unchanged at 27 percent at its November monetary policy meeting in Abuja, with Governor Olayemi Cardoso saying the decision was intended to sustain gains in inflation control and price stability while allowing earlier tightening measures more time to transmit through the economy. The two-day Monetary Policy Committee (MPC) meeting concluded that the continued slowdown in inflation justified maintaining the current stance rather than resuming rate hikes.
The MPC kept the Cash Reserve Ratio for commercial banks at 45 percent, for merchant banks at 16 percent, and retained the liquidity ratio at 30 percent. It also maintained the 75 percent CRR on non-TSA public sector deposits and adjusted the asymmetric corridor around the policy rate to +50/-450 basis points, a configuration designed to discourage idle deposits at the central bank and encourage lending to the real economy. The decision followed a 50 basis point reduction in the Monetary Policy Rate in September, the first rate cut since 2020, introduced as inflation began to ease from earlier peaks.
Headline inflation fell to 16.05 percent in October from 18.02 percent in September, after reaching historic highs in 2023 when the removal of fuel subsidies and the depreciation of the naira pushed prices sharply higher. The recent moderation has been attributed to tighter monetary conditions, improved food supply, relatively stable petrol prices and greater exchange rate stability. The MPC also noted a stronger external position, reflected in a current account surplus, rising foreign exchange reserves and a firmer domestic currency.
Committee members highlighted firmer investor sentiment following Nigeria’s removal from the Financial Action Task Force grey list and a subsequent credit rating upgrade. They also reported that the banking sector remained resilient, with most institutions meeting regulatory benchmarks and 16 banks fully compliant with new recapitalisation requirements, supporting financial system stability under the current policy stance.
