The Central Bank of Nigeria (CBN) is expected to begin a long-awaited policy easing cycle, with global investment bank Bank of America forecasting a benchmark interest rate reduction at the upcoming Monetary Policy Committee (MPC) meeting.
If implemented, the adjustment would mark the central bank’s first rate cut since February 2026 when borrowing costs were trimmed from 27 percent to 26.5 percent signaling a decisive pivot after months of maintaining tight monetary policy to rein in inflation.
The anticipated rate reduction follows three consecutive months of slowing disinflation. Headline inflation in Africa’s largest economy softened to 15.39 percent in August, while food inflation experienced its first monthly drop in six months to 19.57 percent.
At 26.5 percent, the central bank’s current policy rate sits roughly 11.1 percentage points above headline inflation, providing substantial room for a cautious cut without sacrificing real positive returns for investors.
Foreign exchange stability and expanding external buffers have further reinforced this outlook. Supported by higher domestic crude output, diaspora remittance inflows and reduced fuel import bills following the Dangote Refinery ramp-up, Nigeria’s gross foreign reserves have surged past $54 billion. The sustained dollar inflows have stabilized the naira near ₦1,320 per dollar at the official foreign exchange window, dampening imported inflation risks.
Signs of an impending policy shift are already evident across domestic financial markets. Money market yields have trended downward, with the central bank reducing stop rates on 364-day Treasury bills for three consecutive auctions to 16.62 percent amid overwhelming investor demand.
Furthermore, global index inclusion such as JPMorgan’s recent addition of Nigerian sovereign bonds to its local currency debt index has enhanced market visibility and offshore investor interest.
See also: Dangote Refinery IPO Triggers Massive Demand, Testing Nigeria’s Fintech Infrastructure
Bank of America analyst Raghav Adlakha noted that these combined tailwinds create ideal conditions for monetary authorities to carefully begin easing borrowing costs.
Lowering the benchmark policy rate is expected to reduce interbank funding costs and trigger a gradual drop in commercial lending rates across deposit money banks.
Cheaper credit would offer significant relief to private sector enterprises, manufacturers and commercial borrowers who have struggled under elevated capital costs, helping stimulate credit expansion and support broader gross domestic product growth heading into the final quarter of the year.
About the Author
Praise fortune is a tech analyst and journalist based in Nigeria, Her work serves as a vital bridge between complex corporate maneuvers and the everyday reader, breaking down high-stakes financial, regulatory, and technological shifts across the African continent into clear highly readable narratives. With a deep focus on fintech, traditional banking transformation and digital infrastructure, she have become a dedicated analyst of the architects building Africa’s digital economy.
