Abuja — Nigeria’s central bank delivered a smaller-than-expected 50 basis point interest rate cut on Tuesday, saying risks to the outlook were balanced and it expected inflation to slow further.
The decision took the Central Bank of Nigeria’s Monetary Policy Rate to 26.50% slightly higher than the 26% expected by economists polled by Reuters.
“The … decision was premised on a balanced evaluation of risks to the outlook, which suggests that the ongoing disinflation trajectory would continue,” Governor Olayemi Cardoso told a press conference.
He said the lagged transmission of previous monetary tightening, sustained exchange rate stability and enhanced food supply were helping to bring down inflation.
INFLATION FALLS FOR 10 MONTHS IN SUCCESSION
Headline inflation slowed to 15.10% year on year in January, its tenth monthly decline in a row, but the central bank wants inflation to fall further into single digits.
David Omojomolo, Africa economist at Capital Economics, said Nigeria’s monetary policy remained very restrictive, leaving plenty of scope for easing in the remainder of the year.
Capital Economics predicts a further 750 basis points of cuts by year-end, taking the policy rate to 19%.
Nigerian President Bola Tinubu has unveiled economic reforms since taking office in 2023 to try to shore up public finances and boost economic growth.
His policy changes have been praised by the World Bank and others, but remaining challenges include attacks by criminal gangs and Islamist insurgents and widespread poverty.
*Elisha Bala-Gbogbo & Chijioke Ohuocha; MacDonald Dzirutwe; editing: Alexander Winning & Barbara Lewis – Reuters
