Cardoso signals caution on interest rate cut next week

Nigeria’s gradual slowdown in inflation has opened the door to interest-rate cuts, but external shocks have complicated the outlook, Central Bank Governor Olayemi Cardoso said on Thursday, ‌signalling policymakers remain in no rush to begin easing.

Investors have been searching for signs that the central bank is nearing an easing cycle after months of slowing inflation. But Cardoso’s remarks underscored policymakers’ caution over external shocks and price risks, suggesting rates may remain higher for longer.

Speaking at the BusinessDay conference in Lagos on Thursday, Cardoso pointed to nearly a year of disinflation as evidence the central bank’s tightening campaign was working.

“There were 11 months of continuous disinflation,” he said, adding that the trend had strengthened expectations that “over a period of time, we would expect interest rates to begin to moderate.”

But he said geopolitical shocks, including conflict involving Iran, had disrupted that trajectory. “If not for the fact ‌that we had this, we had projected that going into next year inflation would have been down to very moderate levels.”

Cardoso defended the bank’s decision to hold rates at its last meeting, despite market expectations of an impending policy pivot. “We didn’t cut, and believe me, we saw things that most other people didn’t see.”

He said the Monetary Policy Committee would remain guided strictly by data rather than market sentiment, and credited the early implementation of economic reforms with helping Nigeria withstand recent global shocks.

“One of the reasons for that is the fact that we had undertaken the reforms a lot earlier,” Cardoso said. “We had resilience and we were able to withstand the shocks.”