Nigeria’s central bank has opted to maintain its benchmark interest rate at 27%, Governor Olayemi Cardoso announced on Tuesday, signaling a cautious approach as the country continues to battle elevated inflation. The decision comes despite expectations from some economists who had anticipated a rate cut.

Analysts Expected a Reduction, but Inflation Remains a Key Risk

A Reuters poll showed that many economists predicted a 1 percentage-point cut, especially following the central bank’s 50-basis-point reduction in September, which marked the first rate decrease since 2020. However, the bank chose to pause further easing in light of persistent price pressures.

Cardoso emphasized that inflation, though declining, remains uncomfortably high, requiring sustained policy focus. “Headline inflation remains high at double digits and requires continued efforts to moderate it further,” he said at a news conference in Abuja.

Inflation Showing Signs of Cooling but Still Elevated

Nigeria’s consumer inflation has been gradually slowing for seven consecutive months, dropping to 16.05% year-on-year in October. This reflects significant improvement from 24.48% in January, yet inflation levels remain above the central bank’s comfort zone.

Economists say the bank’s decision to hold rates underscores its priority of stabilizing prices over stimulating short-term economic growth.

Balancing Growth and Price Stability

The Monetary Policy Committee faces a delicate balancing act:

• Keeping borrowing costs high helps restrain inflation.
• But prolonged high rates can weigh on business activity, credit growth, and consumer spending.

As Nigeria navigates a challenging economic environment marked by currency volatility, high import costs, and structural pressures, the central bank appears focused on anchoring inflation expectations before considering additional rate cuts.

Regional and International Watchers Take Note

Nigeria’s monetary policy decisions are closely monitored across Africa and by global investors, given the country’s position as the continent’s largest economy. Analysts say the central bank’s stance reflects broader global caution, as several emerging markets continue to grapple with inflation in the aftermath of global supply disruptions.