The Monetary Policy Committee (MPC) of the Central Bank of Nigeria (CBN) is anticipated to uphold its inflation-tightening measures during its final meeting of the year. This comes amidst growing inflationary pressures and fiscal challenges affecting the economy.
At its September meeting, the MPC raised the Monetary Policy Rate (MPR) by 50 basis points to 27.25%, citing concerns over core inflation, rising money supply, fiscal deficits, and food price hikes. Despite earlier signs of declining headline inflation, core inflation remained elevated, driven by energy costs and structural challenges. The committee applauded government initiatives, including duty-free imports of food commodities and the anticipated impact of Dangote Refinery on reducing transportation costs and foreign exchange demand for refined petroleum imports.
However, inflation has since resumed an upward trajectory, reaching 33.88% in October. Analysts at Afrinvest have warned that the MPC faces difficult decisions amid weak Purchasing Managers’ Index (PMI) readings, escalating fiscal deficits, and continued naira depreciation. The composite PMI for October declined to 49.6 points from 50.5 in September, reflecting weaker industrial and agricultural activities. Energy price increases (+2.2% m/m) and volatile foreign exchange rates further exacerbate inflationary pressures.
Nigeria’s fiscal deficit and rising public debt, projected to exceed ₦150 trillion by 2025, are additional challenges the MPC must address. Analysts project the MPC will likely raise the MPR by at least 25 basis points to reinforce efforts to curb inflation, stabilize the naira, and attract foreign investment. Meristem Securities predicts a more aggressive 50-basis-point hike to 27.75%, emphasizing the need for price stability and investor confidence.
As global and domestic economic conditions remain uncertain, the MPC’s decision next week will be pivotal in shaping Nigeria’s monetary policy outlook.