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Nigeria Monetary Policy March 2023

Nigeria: Central Bank slows pace of tightening in March

At its 20–21 March meeting, the Monetary Policy Committee of the Central Bank of Nigeria delivered a 50 basis point hike that brought the key rate to 18.00%. The move came on the heels of January’s 100 basis point increase and signaled a slowing pace of tightening—which markets had largely expected. The decision regarding the size of the hike was once again not unanimous: One of the 12 committee members preferred a 25 basis point raise, while another favored a hold. The Bank did not introduce changes in the asymmetric corridor, the cash reserve ratio or the liquidity ratio.

The decision to increase was driven by continued upside risks to the inflationary outlook and the acceleration of inflation through February. That said, the acceleration has been more gradual, which prompted the smaller 50 basis point rate increase. With regard to activity, the Committee stated the recovery has continued, albeit at a moderate pace. This recovery provided room for a hike, albeit a smaller one.

The press release was once again void of explicit forward guidance. Meanwhile, the tone was unchanged from previous communiqués and remained hawkish; the Bank commented that upside risks to the inflationary outlook remain, signaling that the tightening cycle is not over yet.

The next meeting will take place on 22–23 May.

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