CBN Poised to Keep Inflation in Check as Pressure Mounts: Analysts Predict Further Rate Hike

The Central Bank of Nigeria’s (CBN) Monetary Policy Committee (MPC) is expected to continue its inflation-targeting approach at its final meeting of the year, spurred by renewed upward pressure on prices. With inflation concerns back on the rise, experts predict that the Committee may implement a fresh interest rate hike to anchor stability in the economy.

At its previous meeting in September, the MPC raised the Monetary Policy Rate (MPR) by 50 basis points to 27.25 percent, citing persistent concerns about core inflation, rising money supply, and the impact of fiscal deficits. Despite some earlier optimism as headline inflation appeared to ease, the committee had expressed caution, pointing to underlying factors—including high energy costs—that continue to drive core inflation upwards.

In a statement following September’s meeting, CBN Governor Olayemi Cardoso acknowledged the government’s measures to improve security in agricultural areas and stressed the need for sustained intervention. “The MPC applauded efforts to bridge the food supply deficit through duty-free food imports and looked forward to domestic fuel supplies from the Dangote refinery, which could reduce transportation costs and ease food price pressures in the short to medium term,” Cardoso said. He also noted that the refinery’s output could help stabilize foreign exchange reserves by reducing the need for refined petroleum imports.

However, recent economic indicators have fuelled speculation that the CBN’s hawkish stance will continue, with another rate increase likely in the cards. Analysts at Afrinvest warned that the MPC’s task is becoming more complex, given “re-inflationary signals from major economies, rising domestic prices, and an expanding fiscal deficit.” Their report highlighted recent data showing the broadest measure of money supply grew by 1.6 percent month-on-month to reach ₦109 trillion in September.

Further complicating the outlook is the latest Purchasing Managers’ Index (PMI) report from October, which showed a softening in business activity. The composite PMI dropped to 49.6 from 50.5 in September, signalling contraction across several sectors, notably in Industry, where key metrics such as New Orders and Employment declined. “Among the 17 subsectors surveyed, Food, Beverage, and Tobacco recorded the sharpest contraction, reflecting the dual impact of eroding household purchasing power and a volatile exchange rate, which saw the naira fall to ₦1,671.32/USD in October,” Afrinvestnoted.

With inflation currently standing at 33.88 percent, analysts argue that the CBN will likely prioritise stability. Meristem Securities’ latest macroeconomic update pointed out that several global and domestic factors are likely to weigh heavily on the MPC’s deliberations. “The reversal of disinflationary trends in advanced economies, recent oil price declines, and the ongoing naira depreciation all pose risks to domestic stability,” they said. Rising public expenditures and currency devaluation have added further stress to Nigeria’s fiscal position, with national debt swelling to ₦134.3 trillion in the first half of the year.

“Despite elevated yields on fixed-income assets, investors remain unsatisfied, putting more strain on the monetary environment,” Meristem’s report added. Analysts there expect a 50 basis point increase in the MPR to 27.75 percent, asserting that the MPC is likely to focus on inflation control, currency stabilisation, and protecting investor confidence.

Although some observers argue that a higher rate could weigh on economic growth, the MPC’s commitment to containing inflation appears firm. With Nigeria’s economic challenges amplified by external pressures, the Committee’s anticipated rate hike next week underscores its determination to balance domestic stability with a robust policy response.