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| At its 299th meeting, the Monetary Policy Committee (MPC) decided to hold all policy parameters unchanged. If you were hoping for a rate cut, calm down, it’s not time yet. Here’s the scorecard: – Monetary Policy Rate (MPR): 27.5% – No change. – Asymmetric Corridor: +500/-100 – Still the same. – Cash Reserve Ratio (CRR): 50% for Deposit Money Banks (DMBs), 16% for Merchant Banks – No movement. – Liquidity Ratio: 30%—Steady as she goes. |
| Inflation Numbers – A Statistical Plot Twist Yesterday, the National Bureau of Statistics (NBS) released updated inflation data, recalibrated with a new 2024 base year. The result? Nigeria’s headline inflation now stands at 24.48%, a huge drop from December 2024’s 34.80% (which was based on the old 2009 base year). So, with this significant drop, why didn’t the MPC slash rates? |
 Source: Data sourced from NBS. |
 Source: Data sourced from CBN and Rate Captain. |
| Well, let’s be clear: this isn’t magic, just math. The new base year is simply a recalibration that better reflects Nigeria’s real inflation trends. In the words of CBN Governor Olayemi Cardoso, comparing January 2025 figures to December 2024 is like comparing apples to oranges—and honestly, that’s unfair to oranges. |
| Reading Cardoso’s Mood – No Cuts (Yet), But Optimism in the Air While no rate cut was announced, Cardoso looked pretty satisfied with the economic progress so far. Key wins include: – Inflation moderating significantly – Stronger Naira competitiveness – Closing the gap between official and parallel FX markets – Stabilizing financial markets – General macroeconomic improvements |
| Inflation: The Elephant (or Maybe the Bag of Rice) in the Room The CBN isn’t rushing to celebrate just yet. While inflation is cooling, food inflation remains the biggest threat. However, the Federal Government’s push for agricultural incentives and improved security in food-producing regions is expected to bring food inflation down soon. The December 2024 CPI report gave a glimmer of hope: – YoY food inflation eased to 39.84% in December (from 39.93% in November). – MoM food inflation slowed to 2.66% (from 2.98% in November). Translation? Food inflation is still high, but the trend is pointing downward. Expect a few bumps, but 2025 should be a year of steady inflation deceleration. |
| So, What’s the MPC Playbook for 2025? If you want to predict rate movements, here’s a pro tip: forget about YoY inflation comparisons, and focus on the Month-on-Month (MoM) prints. The Cardoso administration is going all-in on orthodox monetary policy, meaning rate adjustments will be 100% tied to inflation trends. As long as inflation continues to decline month-on-month, a rate cut will be on the table. |
| Betting on a Rate Cut? Here’s What to Watch With T-bill and bond yields declining, market expectations for inflation are cooling off. Even Cardoso seems to agree. – Our take? The MPR has peaked. No more hikes in 2025. The only way is down. – If inflation keeps dropping on a MoM basis through May, expect the first rate cut before mid-year. – Why? Lower rates will be crucial in helping Nigeria hit its trillion-dollar economy target and ease credit costs—because let’s face it, sky-high borrowing costs aren’t helping anyone. |
| Be Patient, the Cut is Coming While no rate cut happened this time, the groundwork is being laid for one later in the year. If inflation stays on a clear downward path, the MPC will have no choice but to loosen the screws. Keep your eyes on the MoM figures—that’s where the real story lies. |
| CBN Signals Exchange Rate Stability – Naira’s Bad Days Are Numbered During the MPC press briefing, CBN Governor Olayemi Cardoso exuded confidence about the exchange rate, hinting that it has finally found some stability. Given the 9% appreciation of the naira since early December 2024 and the shrinking gap between the official and parallel markets, it’s clear that the CBN’s FX reforms are yielding results. |
| A major game-changer? The introduction of the Electronic Foreign Exchange Matching System (EFEMS)—which has boosted transparency in the FX market and enhanced price discovery. Plus, with the new Nigeria Foreign Exchange (FX) Code kicking in, expect even more stability in the coming months. Now, here’s the fun part: since the CBN is satisfied with where the exchange rate stands, you can bet they won’t hesitate to defend the naira against any supply/demand shocks. In simpler terms: – If you were planning to short the naira, it might be time to reconsider. Yes, FX volatility will still be a thing in 2025, but compared to 2024? We expect a much stronger naira performance. Our 2025 outlook suggests that, in the absolute worst-case scenario, the naira won’t fall beyond N1700/$—and even that seems like a stretch. |
| Why Are Investors Bullish on Nigeria? Well, let’s count the reasons: – External Reserves Stand Strong – $39.4 billion as of February 14, enough to cover 9.6 months of imports. – Reforms Are Paying Off – Confidence is building, and global investors are taking notice. – Oil Production Surpassed Quotas – January output hit 1.54 million barrels per day, according to NUPRC. – Oil Prices Holding Up – Despite bearish sentiment, crude prices remain high. – Credit Rating Agencies Are Taking Notes – With Moody’s, Fitch, and others praising Nigeria’s reforms, will S&P give us another upgrade soon? |
| Final Thoughts – Let’s Go Long on Nigeria After a turbulent 2023 and early 2024, Nigeria is finally turning a corner. Inflation is cooling, the exchange rate is stabilizing, and the macro outlook is improving. Yes, there’s still work to do, but the pieces are falling into place. The MPC may not have cut rates yet, but if inflation maintains its month-on-month downtrend, expect a rate cut before mid-year—a move that would boost growth, ease credit conditions, and solidify Nigeria’s trillion-dollar economy trajectory. For now? Stay bullish on Nigeria. The tide is turning. |
