Nigeria's central bank has opted to hold its benchmark interest rate steady at 27.50%, signaling a cautious approach to balance the need to lower inflation with the need to support an economy struggling with currency volatility and rising borrowing costs. The decision, announced on Thursday, comes after the rebasing of the consumer price index (CPI), which adjusted the weighting of items in the consumption basket to reflect current spending patterns.

The Monetary Policy Committee (MPC) assessed recent macroeconomic developments, including exchange rate stability and a gradual slowdown in fuel prices, and decided that holding rates steady was the best course of action. According to CBN Governor Olayemi Cardoso, the committee noted the recent rebasing of the Consumer Price Index (CPI) by the National Bureau of Statistics (NBS), which lowered reported inflation rates, although underlying price pressures remain high.

Nigeria's inflation stood at 29.90% in January before rebasing, but the updated methodology adjusted it to 28.92%. Despite the reported slowdown in inflation, businesses and consumers still face rising costs, particularly for food and imported goods. Many traders argue that while official inflation figures show moderation, real-world price increases remain severe due to persistent naira weakness and global supply chain disruptions.

The decision to hold rates was widely anticipated by analysts, who argued that further tightening could stifle business activity, while a premature cut might worsen inflationary pressures. Basil Abia, an economist at Veriv Africa, noted that "inflation is at an inflection point but could pick up again in a few months. The MPC will likely wait for at least three more months to assess the rebased numbers before making a major move."

Market reaction was largely muted, with the naira trading at ₦1,450 per dollar in the official market, showing little movement from earlier in the week. Bond yields also remained stable, reflecting investor expectations that the CBN would maintain its stance.

Since the start of 2024, the CBN has raised rates by a cumulative 800 basis points in an aggressive attempt to rein in inflation and stabilize the naira. This latest decision suggests the central bank is pausing to evaluate the impact of those hikes rather than committing to further tightening. With the next MPC meeting scheduled for May 2025, investors will be watching for signals on whether the CBN maintains its hawkish stance or shifts toward easing if inflation shows signs of further moderation.

The CBN's decision highlights the delicate balance between controlling inflation and supporting economic growth in Nigeria. As the country navigates the complexities of monetary policy, the central bank's approach will be closely watched by investors, businesses, and consumers alike.