…As MPC meets on Monday
Ahead of the Monetary Policy Committee (MPC) meeting scheduled for Monday and Tuesday in Abuja, most analysts in the financial services sector are predicting a cautious approach to monetary policy easing.
Their expectations are hinged on the sustained decline in inflation and improved stability in the foreign exchange (FX) market, which have together boosted investor confidence in Nigeria’s economy.
According to the National Bureau of Statistics (NBS), Nigeria’s headline inflation rate eased for the third consecutive month, dropping to 22.22 percent in June 2025 from 22.97 percent in May.
The naira has also seen relative stability following several regulatory interventions by the Central Bank of Nigeria (CBN). As of Wednesday, the local currency exchanged at N1,537 per dollar in the parallel market and settled at N1,530.25 in the official FX market, narrowing the gap between the official and parallel market rates.
The CBN has announced that the 301st MPC meeting, where decisions on key interest rates are taken, will be held on Monday, July 21 and Tuesday, July 22, 2025. According to the apex bank, the meeting will be hosted at the MPC Meeting Room, CBN headquarters in Abuja.
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Razia Khan, managing director and chief economist, Africa and Middle East Global Research at Standard Chartered Bank, said: “With inflation having decelerated for three consecutive months in Nigeria and the naira appreciating, we expect a cautious 25 basis-point cut from the CBN, the first in a likely drawn-out easing cycle.”
She noted, however, that risks remain finely balanced, and the CBN, which is implementing inflation targeting under IMF technical guidance, may choose to keep rates unchanged until there is clearer evidence of sustained price declines.
Analysts at Parthian Partners also weighed in, noting that the release of June’s inflation data just ahead of the MPC meeting may bolster the case for monetary easing.
“With inflation trending downward for a third straight month, dovish members of the committee will likely see a growing case for monetary easing. Market signals already reflect this sentiment. Yields on Open Market Operations (OMO) bills and treasury instruments have started to decline in recent weeks, as investors anticipate a potential policy pivot,” they said.
Still, they cautioned that the committee is likely to move carefully, given lingering global uncertainties, including the approaching August 1 tariff deadline and potential volatility in commodity markets.
“Despite the recent decline in inflation, global risks remain elevated. Further tightening in global conditions or renewed volatility could undermine progress on the inflation front,” the analysts said. As such, they expect the MPC to adopt a balanced tone, acknowledging the improving inflation outlook while maintaining current rates to safeguard macroeconomic stability and monitor external developments.
Adeola Ayibiowu, managing director and chief executive officer of Lovonus Microfinance Bank Limited, also predicted that the MPC would most likely leave the benchmark rate unchanged at 27.5 percent, keeping a watchful eye on inflation and FX dynamics. However, he noted that a modest 25 basis-point (bp) hike remains possible if economic pressures intensify.
Similarly, analysts at Afrinvest Securities Limited expect the MPC to hold its policy stance despite signs of disinflation and FX market stability. They attributed this to persistent external risks, including food supply shocks resulting from insecurity and flooding, as well as uncertainties tied to the delayed release of Nigeria’s rebased Q1 2025 GDP data.
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At its last meeting in May, the MPC unanimously voted to retain the benchmark interest rate at 27.50 percent. The decision reflected cautious optimism amid improving macroeconomic indicators. The committee observed that narrowing gaps between official and parallel exchange rates, falling prices of Premium Motor Spirit (PMS), and a favourable trade balance signalled a possible easing of inflationary pressures.
Investors’ bet
Nigeria’s stock market cap hit N82.41 trillion on Thursday as investors continued to reroute funds from the fixed income (FI) market. Particularly, the moderating rate of treasury bills (T-bills) pushed investors into betting on equities.
Equities market has risen this year by 26.58 percent, majorly driven by consumer goods, banking and insurance stocks while oil & gas stocks have seen remarkable profit taking by investors.
The recently released Consumer Price Index (CPI) data by the NBS revealed that Nigerian inflation moderated to 22.22 percent year-on-year (YoY) in June versus 22.97 percent in the prior month, a development analysts linked to a combination of softer energy prices and a favourable base effect.
“We expect that, given June’s easing inflation at 22.22 percent year-on-year (y/y), the bond market will maintain a positive outlook, with room for further yield compression at the mid-to long end of the curve. However, tight system liquidity may keep short-term demand relatively subdued,” analysts at Lagos-based Vetiva Research said.
Also in their July 16 note, Comercio Partners said, “While headline inflation has been showing signs of disinflation, an encouraging trend, food inflation remains a major concern. The exchange rate of the naira has appreciated significantly, reversing much of the depreciation witnessed earlier in the year and bringing it close to its January 2025 opening level.
“The Monetary Policy Committee (MPC) is scheduled to hold its 301st meeting on July 21 and 22, 2025. We expect the MPC to maintain the current interest rate, while possibly adjusting the asymmetric corridor to stimulate economic activity and support domestic demand.”
In another major milestone on Thursday, the Nigerian Exchange Limited (NGX) All Share Index (ASI) crossed 130,000 points as increased demand for equities continued to fuel NGX rally. The market rallied by 1.02 percent yesterday.
Nigeria’s listed stocks value, which had ahead of Tuesday’s public holiday surpassed N80trillion mark, an indication of broad-based investor participation and growing confidence in the local equity market, closed at N82.417trillion on Thursday.
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“We maintain a cautiously optimistic outlook for the equities market this week, with expectations of sustained positive momentum in the absence of any significant negative macroeconomic or market shocks,” Futureview research analysts said in their July 16 note.
CardinalStone Research said, “Barring any FX or energy shocks, we anticipate sustained moderation in headline inflation. The knock-on effect of our inflation expectation is likely to translate to a cumulative 50-100bps reduction in policy rate in H2’25.”
