Headline: Nigeria Central Bank Halts Rate Hikes as Inflation Slows
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The Central Bank of Nigeria (CBN) has suspended its aggressive monetary tightening after a revised inflation calculation method revealed a significant decline in price growth.
Governor Olayemi Cardoso announced that the Monetary Policy Committee (MPC) had unanimously decided to maintain the policy rate at 27.5%. The decision aligns with the predictions of eight out of nine economists surveyed by Bloomberg.
Cardoso attributed the pause to favorable macroeconomic developments, including recent stability in the naira's value. The MPC raised rates by 16 percentage points since 2022 to combat record-high inflation and stabilize the naira, which had depreciated against the dollar following currency reforms in 2023.
Despite acknowledging the potential risks posed by US trade policy to global inflation, Cardoso expressed optimism in the efficacy of the policy measures implemented by the CBN. "Inflation is gradually trending down," he said.
The naira has stabilized since early December, trading within a narrow range of 1,470 and 1,550 per dollar. A revamp in the data calculation method resulted in annual inflation slowing to 24.5% in January, compared to 34.8% a month earlier under the old method.
Bloomberg Africa economist Yvonne Mhango predicts that inflation will moderate in the first half of 2025, providing policymakers space to begin cutting rates by the end of the year.
Analyst David Omojomolo of Capital Economics believes the governor's cautious optimism is warranted, citing domestic factors that will likely lead to a further decline in inflation. He expects the MPC to cut rates by 100 basis points to 26.5% at its May meeting and to 24.75% by year-end.