Is Nigeria set for biggest rate cut since 2020, six economists polled by Bloomberg say yes.

Nigeria’s central bank is set to resume easing with its largest interest-rate cut since 2020 on Tuesday, as a stronger naira, moderating inflation and rising foreign-exchange reserves give policymakers room to shore up economic growth.

All six economists surveyed by Bloomberg expect Governor Olayemi Cardoso to lower the benchmark rate when he announces the monetary policy committee’s decision after 2 p.m. in Abuja.

The only disagreement is over the size of the move, with two economists forecasting a 50 basis-point cut and the rest expecting a 100 basis-point reduction, after policymakers unexpectedly held the benchmark rate at 27% in November.

A cut of that magnitude would be the largest since September 2020, at the height of the coronavirus pandemic.

The move would bring Nigeria in line with much of Africa, where policymakers from Zambia to the Democratic Republic of Congo are cutting rates as stronger currencies and lower oil prices help tame inflation.

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Nigeria’s inflation rate fell to 15.1% in January from 15.2% a month earlier, helped by easing food prices.
The naira has also strengthened, gaining more than 6% since the start of the year after the central bank allowed bureaux de change operators access to the main foreign-exchange market. That boosted retail dollar liquidity and narrowed the gap between the official and unofficial naira rate.

Those factors, combined with foreign reserves of around $49 billion, give the MPC room for a “modest adjustment of 50 basis points,” to support the economy, said Ayodele Akinwunmi, chief economist at United Capital Plc. It is unlikely to ease more aggressively as broad money supply continues to expand, Akinwunmi said.

Cardoso earlier this month also warned about the risks of increased fiscal spending ahead of general elections scheduled for early next year, cautioning that excess liquidity in the banking system could threaten price stability if not carefully managed.

Goldman Sachs Group Inc., meanwhile, expects a larger move. Yields at the central bank’s open market operations — bill auctions to local lenders and foreign portfolio investors — that have effectively become its main policy tool, have fallen by about 150 basis points in recent months. These “tend to lead moves in the policy rate,” making a cut of a similar magnitude consistent, said Andrew Matheny, a senior economist at the investment bank.