Nigeria Cuts Interest Rates for First Time in 5 Years
Nigeria’s central bank has lowered its benchmark interest rate for the first time since the Covid-19 pandemic, a move seen as a signal of renewed confidence in the country’s economic stability.
The Monetary Policy Committee reduced the key lending rate from 27.5% to 27% on Tuesday, alongside a cut in the cash reserve ratio for commercial banks from 50% to 45%.
Central Bank Governor Olayemi Cardoso told reporters in Abuja that the decision was driven by “a clear trend of disinflation and the need to support growth.” Annual inflation eased to 20.1% in August from 21.9% in July, marking five consecutive months of declining price pressures.
The naira, which has remained stable for over a year following last year’s painful devaluations, has gained 2.5% against the dollar this month. Foreign reserves have also improved, reaching $41.4 billion last week.
Economists say the latest move could pave the way for more easing later this year. “This signals confidence in exchange rate stability, higher reserves, and a healthier current account balance,” one analyst noted.
The cut has been welcomed by businesses struggling with borrowing costs in Africa’s most populous country. Nigeria has recently attracted significant inflows from foreign investors seeking high-yield bonds, and the government hopes cheaper credit will stimulate private sector growth.
The last rate cut was made during the pandemic under former governor Godwin Emefiele, who is now facing trial on multiple charges related to his time in office. Cardoso, who assumed leadership of the central bank in 2023, has pledged to restore credibility and adopt orthodox monetary policies.
The bank’s next and final policy meeting of the year is scheduled for November, where further reductions remain possible if inflation continues to slow.