For Nigerian businesses crushed by high borrowing costs, the latest inflation reading brings cautious optimism.
With headline inflation down to 15.39 percent and food inflation sharply slower at 1.02 percent month-on-month, economists believe a rate cut may be closer than expected.
After nearly three years of aggressive tightening that pushed the Monetary Policy Rate, MPR, to 27.5 percent, analysts say the sustained moderation gives the CBN room to pivot.
NBS on Monday said headline inflation fell to 15.39% YoY. Food inflation 19.57% YoY vs 25.30% last year August. Crucially, month-on-month food inflation crashed to 1.02% from 5.56% in July, showing actual slowing, not just base effect.
Why Development Fuels Rate Cut Optimism
CBN’s MPC has hiked rates by 875bps since 2022 to tame inflation and the analysts say the 5th consecutive monthly decline in headline inflation, with the food supply improving due to harvest, the Monetary Policy Committee may likely tinker eith the rate
Also, the Naira relatively stable against wyster two volatility, the analysts say if September inflation also slows, MPC at its November meeting could cut by 50-100bps.
“This is the first time in 2026 that both food and headline are slowing in real terms. If sustained, CBN has a strong case to start easing.” says an Economist
For Banks & Borrowers:
MPR at 27.5% means prime lending at 30-35%.
READ ALSO:Amid Rising Cost Of Living, Nigerians See First Food Price Relief In 2026 As Inflation Eases To 19.57%
Africa’s wealthiest industrialist, Aliko Dangote noted at the Arise Television’s, The Money Show on Tuesday said interest at above 30 oercent cannot enviurage any investior into the country, neuther enviurages lical investors to risk it.
Consequently, anslysts say a rate cut would lower cost of funds, encourage credit expansion. Banks may start repricing loans. SMEs who stopped borrowing may return.
For Manufacturers / MAN
High MPR means higher cost of working capital. MAN says average lending at 32% has shut factories. According Ower to the Association, rate cut leads to cheaper inventory financing, lower cost of production, and ultimately potential price relief.
For Consumers:
Noting thst the imoact of thr vurrent development coukd take up to three to six months to be felt, they day lower rates could lead to lower consumer loan rates, mortgages, for few Nigerians that are still into the sector, asset finance, could boost spending ahead of festive season.
For Government:
Lower rates reduce domestic debt service cost. The federal government spent about N8trn+ on debt servicing in H1.
Easing, they argue, could help fiscal space.
The Caveats:
Desoite thevhigher exiectstions ocassioned by the Inflation easing, they argue thst even at 15.39%, it us still very high and still almost doubles CBN target of single digit
Regarding the development as mere figures, they argue that the core inflation is still sticky due to high energy vost, referencing petrol at N1,400/litre.
Similarly, there will be fx risk If naira weakens as inflation could rebound. Just as food insecurity in North-West could disrupt harvest gains
CBN Governor, Yemi Cardoso has insisted on orthodox tightening until inflation sustainably cools. Most economists say, judging by thesedevelopments, the expectations of rate cut are high.
