Analysts have implicitly endorsed Olayemi Cardoso, the governor of the Central Bank of Nigeria (CBN), for his tough position on inflation, which they claim provides little opportunity for a policy change in the near future, as the Monetary Policy Committee (MPC) of Nigeria gets ready for its September 2025 meeting.
In his remarks at the July MPC meeting, Cardoso indicated that the committee will maintain stable interest rates, giving stability and the disinflation process precedence over growth stimulation.
The Message of July Reverberates
The committee decided to maintain the Monetary Policy Rate (MPR) at 27.5 percent while leaving all other policy levers unaltered during the July MPC meeting. Using a decreasing trade surplus, growing foreign reserves, and a stronger naira that had bolstered corporate confidence and decreased the thirst for domestic deposits, Cardoso said in his remarks that the meeting was happening “during a period of increased optimism.”
However, the governor made it apparent that the battle against inflation was far from over, even with the macroenvironment improving. “The rate of deflation is still slow and not high enough to justify any loosening of monetary policy,” he stated. Cardoso added that negative real returns deterred local investment and savings and warned of “sticky core inflation and excess liquidity” as major threats.
He stated that traditional policies that lower inflation and increase the appeal of domestic assets must continue to be the major focus. He emphasized, “We have to safeguard the gains.”
Analysts believe that September is “all but certain.”
Those statements were as good as forward direction for the majority of experts.
According to Kemi Adesina, head of research at Alpha Capital Advisory, Cardoso’s tone was clear-cut. “A hold in September results from protecting the gains. It is doubtful that the MPC will risk an early cut unless inflation significantly declines.
That opinion was expressed by Renaissance Africa Partners economist Chijioke Nwosu. Credibility is the CBN’s top priority. They won’t abandon it with conflicting messages after stabilizing the foreign exchange market and reducing inflation. Consistency, not flexibility, will be the focus of the September meeting.
Although the consensus is still for a hold, several experts even suggested that the MPC would express readiness to tighten further if inflation surprises to the upside.
Worldwide Context: No Haste To Simplify
The CBN’s cautious approach is consistent with a larger worldwide pattern. Even while global inflation has decreased, major central banks are still hesitant to declare triumph.
After its aggressive cycle of rate hikes, the U.S. Federal Reserve has stopped but has refrained from making any commitments to decrease rates until inflation has firmly returned to its target of 2 percent. Citing persistent wage pressures, the Bank of England is likewise remaining stable. The European Central Bank emphasized that risks are still high despite a small rate cut.
According to Apex Macro Strategies executive director Tunde Adebanjo, “central banks around the world are prioritizing disinflation credibility over growth.” “With the added obstacle of a structurally high food inflation problem, Nigeria is following the same playbook.”
Progress but Fragility in Domestic Realities
Nigeria’s inflation trajectory has improved since it peaked at above 30% last year. Headline inflation had decreased to about 22% as of June 2025. In recent months, the naira has remained stable due to increasing foreign exchange inflows and higher reserves. A decrease in speculative dollar holdings has contributed to the resurgence of business confidence.
However, the advancement is brittle. Due to supply chain disruptions, high transportation costs, and structural limitations in agriculture, food inflation is nevertheless persistent. In addition, core inflation is still sticky due to carryover from earlier naira depreciation and ongoing energy prices.
According to FirstBridge Consulting chief economist Ayo Ogundipe, “Cardoso was clear that the risks are not gone.” Domestic savings are discouraged by negative real returns, and inflation expectations are still unanchored. The CBN cannot relax unless such dynamics alter.
Effects on Households and Businesses
There are two sides to the persistence of high rates. Investors are reassured, on the one hand, that Nigeria is committed to stabilizing its macroeconomic situation. On the other hand, it maintains high borrowing costs for consumers and companies.
Small and medium-sized businesses (SMEs), which are already struggling with high input costs, have trouble finding loans that is affordable. While households suffer from high loan interest rates, manufacturers have cautioned that extended tight conditions may impede the expansion of output.
According to Funke Olatunji, CEO of a manufacturing company situated in Lagos, “many firms cannot sustain borrowing at over 30 percent.” “Stability is important, but capacity investment will stall without cheaper credit.”
A premature rate drop, however, would backfire by rekindling inflation and starting a new wave of naira devaluation, according to economists. According to Nwosu, “short-term pain is inevitable.” An anchoring of expectations is the top priority. We run the risk of resuming the unstable cycle without that.
Reaction of Investors: Stability Over Yield
In recent months, foreign portfolio investors have gradually made their way back to Nigeria’s debt markets, attracted by improved foreign exchange stability and higher nominal returns. Many people are still cautious of negative real returns, though.
Sarah Bello, portfolio manager at Westbridge Asset Management, stated that Cardoso’s reference to further market-based instruments to support the yield curve is significant. “Liquid, reliable instruments that accurately reflect market pricing are what investors seek.” This would enhance financial transmission and increase participation.
Even if corporate borrowing costs continue to be high, analysts think a stable policy environment is good for sentiment in the share market. “Stability is better than uncertainty for equities,” Adebanjo stated. “When investors are aware that the policy is consistent, they can make plans.”
September Outlook: Hold, With a Hint of Hawkishness
As the September conference approaches, agreement on another halt is solidifying. Real rates are extremely negative, inflation is still excessively high, and the stability of the naira is still being examined.
According to Adesina, “the MPC is not in a position to signal cuts yet.” “They can, at most, reaffirm the need for patience and the fact that easing won’t occur until inflation is firmly under control.”
Even at the expense of short-term economic pressure, the CBN seems content to put disinflation ahead of growth for the time being. According to observers, the central bank’s determination is intended to solidify confidence and steer clear of previous cycles’ blunders, where premature relaxation resulted in resurgent volatility.
Final Thought: Preserving the Hard-Won Gains
Market expectations are still being guided by Governor Cardoso’s message from July. Analysts and investors alike have understood his demand to “protect the gains” as a commitment to caution and conservatism.
With the MPC emphasizing its caution against inflation and its reluctance to compromise stability for temporary comfort, another hold is the expected outcome in September. That means higher borrowing prices for longer periods of time for consumers and businesses. However, for the economy as a whole, it shows that Nigeria’s monetary authorities are committed to securing progress, preserving confidence, and establishing expectations.
One fund manager from Lagos put it this way: “It’s about discipline.” Prioritize stability above expansion.
