Dear Subscriber,
Easing the pain or reversing the gains?
The global and domestic economic landscape is shifting, and Nigeria’s policymakers are navigating treacherous waters. Balancing risks remains delicate – tighten too much, and suffocate growth; ease too soon, and inflation spirals.
In its first meeting in 2025, held on February 19-20, the Monetary Policy Committee (MPC) finally hit the pause button on interest rate hikes after 12 months of an aggressive tightening campaign. The restrictive stance saw the policy rate peak at 27.5% p.a., pushing maximum lending rates above 30% p.a. Markets perceive this move as the beginning of a more accommodating stance as the yield curve inverted, especially at the short end following the rate decision.
But will this shift unlock productivity and growth, or will it rekindle inflationary pressures and distort market dynamics? History has shown that policy transitions are never smooth, and the US, the UK, and Ghana are eloquent examples—inflation trajectory reversed upward after rate cuts.
Inflation data revamp: Numbers, narratives, and market reactions
After a long wait, the NBS released the new inflation data for January 2025 based on the revised methodology. The data overhaul involves changing the price reference year from 2009 to 2024, and reconstituting and re-weighting the CPI basket.
Nigeria’s inflation is no longer 35%! It is now 24.5%; all thanks to the data revamp. But is this merely an exercise in statistical recalibration, or does it mark a fundamental shift in Nigeria’s economic trajectory?
After all, as Prof. Ronald Coase, Nobel Prize winner in Economic Sciences, said, “Torture the data, and it will confess to anything.”
Data revisions are nothing new—GDP rebasing in 2014 made Nigeria Africa’s largest economy overnight. Yet, such adjustments have real consequences.
A lower inflation figure changes interest rate expectations, fiscal projections, and investor sentiment. How will markets react? Will bond yields decline? Will policymakers shift their approach?
In this edition of FDC Prism, we cut through the noise, providing a deep dive into Nigeria’s evolving policy environment and its broader market implications—giving you the insights you need to stay ahead.
Enjoy your read!
