Nigeria central bank on Tuesday lowered its key interest rate for the first time in five years, signaling confidence in the country’s economic recovery and the stability of its currency.....KINDLY READ THE FULL STORY HERE▶

The Central Bank of Nigeria (CBN) reduced the benchmark lending rate by half a percentage point to 27 percent. The decision, made by the 12-member Monetary Policy Committee, comes as inflation continues to ease and the naira remains stable.

CBN Governor Olayemi Cardoso said at a press briefing in Abuja that the move was guided by falling prices and the need to support a still-struggling economy. “Disinflation is taking hold, and our policies are beginning to show positive results,” Cardoso said.

Nigeria’s headline inflation slowed to 20.1 percent in August, down from 21.9 percent in July. This marks five straight months of declining prices. Economists see the trend as a sign that the country could continue easing monetary policy in the coming months.

Razia Khan, head of research for Africa and the Middle East at Standard Chartered, noted that the CBN’s action indicates confidence in Nigeria’s currency stability and higher foreign reserves. “Much more importantly, the central bank expects sustained disinflation in the months ahead, hinting at more easing to come,” she said.

The latest drop in inflation is significant compared to the same period last year, when prices rose 32.15 percent. In January, Nigeria’s statistics agency updated its consumer price index, changing the base year and adjusting weights to better reflect current spending patterns and the impact of new industries and technology.

In addition to lowering the lending rate, the central bank also cut the cash reserve ratio—the percentage of commercial bank deposits that must be held with the central bank—from 50 percent to 45 percent. This is expected to make more funds available for lending to businesses.

The naira, Nigeria’s local currency, has remained relatively stable for more than a year after hitting record lows last year. President Bola Tinubu had earlier devalued the currency twice as part of wide-ranging economic reforms, which included the removal of fuel subsidies. The naira has gained 2.5 percent against the dollar this month.

Foreign reserves have also improved steadily, with liquid reserves reported at $41.4 billion last week. The country has attracted significant inflows from foreign investors, drawn by high yields in the local bond market.

Business leaders have welcomed the rate cut, as high borrowing costs have long been a challenge in Africa’s most populous country. Lower interest rates could ease the cost of financing for companies and encourage investment.

This decision is the first reduction in the benchmark rate since the Covid-19 pandemic. The previous rate-setting period was led by former governor Godwin Emefiele, who is currently facing trial on allegations of financial misconduct. Emefiele has denied all charges.

Analysts say the CBN’s move is a key step in supporting economic growth while keeping inflation under control. With further rate decisions expected in November, many are watching closely to see if Nigeria will continue to ease borrowing costs in the coming months.