Despite Disinflation, Analysts Expect Cautious Monetary Easing
Nume Ekeghe
As the Monetary Policy Committee (MPC) of the Central Bank of Nigeria (CBN) begins its 303rd meeting today, analysts have predicted another round of cautious easing of interest rate.
At the two-day meeting which holds in Abuja, analysts specifically predicted a modest easing of the Monetary Policy Rate (MPR), the benchmark interest rate of between 50 and 100 basis points as disinflation gains momentum and macroeconomic conditions stabilise.
Their projections reflect a convergence of improving macroeconomic indicators, slowing inflation, firmer exchange-rate conditions, and strong demand for government securities.
The Consumer Price Index (CPI), which measures the rate of change in prices of goods and commodities, further eased to 16.05 per cent in October, compared to 18.02 per cent the preceding month, the National Bureau of Statistics (NBS) had stated.
The 1.96 per cent decline in headline inflation was attributed to a slower rate of increase in general prices.
Year-on-year, inflation stood at 17.82 per cent, compared to 33.88 per cent in October 2024.
According to the CPI Report for October, “decreased in October 2025 compared to the same month in the preceding year (i.e., October 2024), though with a different base year, November 2009 = 100.”
Owing to this, Development Economist and Lead Consultant to the ECOWAS Commission, Prof. Ken Ife, told THISDAYthat the time has come for a measured, but confidence-boosting adjustment.
He said: “Most macro-economic parameters are positive and convergent, and it has become clear that while inflation is coming down in leaps, the spread between MPR is widening even in a positive real interest rate, and unemployment and poverty are worsening.
“It is important to send an encouraging positive signal by marginally dropping the MPR rate by 50 to 100 basis points.
“This will not risk foreign portfolio inflow and will also lower lending rates and Treasury bills. With 400 per cent oversubscription on our bonds, a marginal drop might help both ways.”
His view aligned with the cautious optimism across segments of the financial markets, even as questions remain regarding the integrity of Nigeria’s new inflation series.
Speaking to THISDAY, Chief Executive Officer of CFG Advisory, Tilewa Adebajo, said: “While I would prefer a 150–200 basis points cut, the MPC might lean towards around 100 basis points.”
He, however, noted that weak clarity around the NBS’ revised methodology continues to complicate economic interpretation.
Adebajo explained that applying the former inflation methodology would still place headline inflation around 26 to 27 per cent.
“The main issue is that if you apply the old inflation methodology, Nigeria’s inflation today should be around 26 to 27 per cent. I cannot give an exact figure because the NBS has not disclosed the basis for the new series. But when I extrapolate, given the recent slowdown, the old inflation rate would still be around 26 per cent,” he added.
Speaking further, he said if the MPC members are to work with the old series, then keeping the MPR at 27 per cent would make sense, because the policy rate would still be slightly above inflation.
However, with the new headline inflation rate reported at 16 per cent, he acknowledged the Committee may find room to ease, though conservatively.
“If the new inflation rate is 16 per cent and the old rate is about 26 per cent as we estimate, they may opt for a modest reduction, perhaps 100 basis points, or maybe even 50.
‘My view is that the economy needs at least a 150 to 200 basis points cut to begin stimulating growth. But because the MPC is being conservative, they may move more cautiously.”
Adebajo also warned that seasonal price distortions could cloud the short-term inflation outlook.
“December typically supports consumer spending and should ordinarily boost growth, not inflation. But seasonal price gouging, such as increases in transport fares and commodity prices during Christmas, distorts inflation patterns and complicates policy decisions. People exploit the festive season to raise prices arbitrarily. That culture worsens our inflation dynamics,” he said.
In a similar vein, analysts at Comercio Partners noted that the disinflation trend and improving FX stability favour a cautious but continued easing cycle.
“Given the significant improvement in inflation and the relative stability of the exchange rate, we anticipate that the Committee will implement a 100-basis point rate cut, which would mark the second rate cut this year. This projection is supported by the clear disinflation trend and continued exchange rate stability,” the firm stated in a report.
