How CBN aims to attract global investors amid monetary policy easing

As Nigeria enters a new era of monetary policy easing, the Central Bank of Nigeria (CBN) is positioning itself to attract global investors through a mix of reforms, improved macroeconomic indicators, and renewed policy credibility.

While favourable external conditions have often supported Nigeria’s economic growth, sound domestic policies remain the true foundation for sustained progress. The exchange rate unification policy of the CBN and other reforms that have contributed to a decline in inflation are beginning to open the economy to greater global investor interest. With the re-emergence of monetary policy easing after a five-year break, Nigeria is signaling a drive to attract new investments, lower lending costs, and advance the government’s broader plan for growth and stability.

Nigeria’s economy has held up remarkably well in recent months despite a decline in crude oil prices, which account for over 90 percent of its foreign exchange earnings. Recent indicators, growth in Gross Domestic Product (GDP), a drop in the inflation rate, relative exchange rate stability, an increase in external reserves, and a rise in capital inflows, all point to an economy regaining momentum.

Aminu Gwadabe, president of the Association of Bureaux De Change Operators of Nigeria, noted that monetary policy implementation has improved significantly, strengthening the resilience of the Nigerian economy. “Findings show that in the past, many economies were reluctant to let their exchange rates move freely. But with better-anchored inflation expectations and stricter macroprudential regulation, Nigeria has increasingly allowed the exchange rate to act as a shock absorber, while the central bank has shifted its focus toward stabilizing economic activity,” he said.

According to him, sustaining the ongoing reforms and building on stronger policy foundations could help Nigeria turn its hard-won resilience into lasting stability and long-term economic growth.

Monetary policy easing began last month when the CBN-led Monetary Policy Committee (MPC) cut the benchmark interest rate by 50 basis points from 27.5 percent to 27 percent, marking the first rate cut since the tightening cycle began five years ago. The decision, reached at the 302nd MPC meeting, reflects a deliberate shift toward supporting economic growth amid easing inflationary pressures.

The move follows five consecutive months of slowing inflation, with projections indicating continued disinflation through the remainder of 2025. This easing phase signals the CBN’s confidence in a stabilising macroeconomic environment and its intention to stimulate economic activity by lowering borrowing costs, improving liquidity in the banking sector, and supporting stronger consumer spending and investment growth.

Adeyemi Adeniran, Statistician-General of Nigeria and CEO of the National Bureau of Statistics (NBS), said the latest Consumer Price Index (CPI) report showed headline inflation dropped from 21.88 percent in July to 20.12 percent in August. “Headline inflation (year-on-year) moderated further to 20.12 percent in August 2025, from 21.88 percent in July, driven by the decline in both food and core inflation. Besides, the second-quarter GDP report solidly puts growth within the quarter at 4.23 percent, representing a four-year high, up from 3.13 percent in the first quarter,” he said.

The NBS report showed that growth was driven by improvements across both the oil and non-oil sectors. Stability in the oil sector combined with expansions in agriculture, industry, and services contributed to above-average performance. The GDP breakdown revealed that the oil sector grew by 20.46 percent in the second quarter of 2025, compared to 1.87 percent in the first quarter, propelled by a significant rise in crude oil production.

Olayemi Cardoso, governor of the CBN explained that monetary policy easing became necessary following a review of macroeconomic developments. According to him, the MPC’s decision to ease policy was made in light of improving inflation trends. “The committee’s decision to lower the monetary policy rate was predicated on the sustained disinflation recorded over the past five months, projections of declining inflation for the rest of 2025, and the need to support economic recovery efforts,” Cardoso said.

Bukola Bankole, Partner and Corporate Finance Expert at TNP, described the 50-basis-point cut as a modest but symbolic move, marking the first break from months of aggressive tightening. “For businesses already borrowing at rates above 30 percent, this adjustment will not immediately ease financing costs, but it signals recognition that growth cannot be perpetually stifled in the name of inflation control,” she said.

According to her, “For investors, Nigeria’s yield story remains unchanged because even after the cut, local instruments remain among the most attractive across frontier and emerging markets. So, a half-point change does little to alter that. The real test is whether inflation continues to ease and whether the Naira can achieve meaningful stability. Inflation in Nigeria is not demand-driven; it is cost-push, reflecting exchange rate volatility, subsidy removal effects, high energy costs, and food supply disruptions. Against this backdrop, further hikes would have been the wrong medicine.”

Bankole further noted that the MPC decision reflects an effort to balance vigilance on inflation with the need to create room for credit expansion and investment. However, she warned that without consistency, stronger fiscal alignment, and structural reforms addressing inflation’s root causes, the cut would remain largely symbolic. “If those elements are in place, this small cut could mark the beginning of a sustainable policy mix that supports growth without abandoning the fight for price stability,” she said.

Bismarck Rewane, managing director of Financial Derivatives Company Limited, also expressed optimism, saying that the remainder of 2025 appears poised for stronger performance, supported by foreign currency inflows and stable commodity prices.

In its continued effort to manage inflation, the CBN recently hosted the Monetary Policy Forum 2025, featuring fiscal authorities, legislators, private sector players, development partners, experts, and scholars under the theme “Managing the Disinflation Process.” The forum aimed to improve monetary policy communication, foster dialogue, and strengthen collaboration on issues shaping monetary policy.

At the event, Cardoso emphasised that the apex bank’s focus remains on sustaining price stability, transitioning to an inflation-targeting framework, and developing strategies to restore purchasing power and ease economic hardship. He reiterated that the CBN is maintaining a disciplined approach to monetary policy, aimed at curbing inflation while stabilising the economy.

“Managing disinflation amidst persistent shocks requires not only robust policies but also coordination between fiscal and monetary authorities to anchor expectations and maintain investor confidence,” Cardoso said. “Our focus must remain on price stability, the planned transition to an inflation-targeting framework, and strategies to restore purchasing power and ease economic hardship.”

The CBN has also prioritised strengthening the banking sector, introducing new minimum capital requirements for banks (effective March 2026) to enhance resilience and prepare the financial system for Nigeria’s ambition of a $1 trillion economy. These reforms underscore the Bank’s commitment to creating an enabling environment for inclusive economic development. However, Cardoso stressed that achieving macroeconomic stability requires sustained vigilance and proactive monetary management.

“As we shift from unorthodox to orthodox monetary policy, the CBN remains committed to restoring confidence, strengthening policy credibility, and staying focused on its core mandate of price stability,” he stated. According to him, transitioning from an exchange rate targeting framework to an inflation-targeting framework aligns with the Bank’s determination to control inflation in line with its price stability objectives.

The non-oil sector also recorded notable progress, expanding by 3.64 percent in the second quarter of 2025 compared to 3.19 percent in the previous quarter. Its contribution to GDP stood at 95.95 percent, only slightly lower than the 96.03 percent recorded in the first quarter, despite the strong rebound in oil output. Sectoral analysis showed that agriculture GDP grew by 2.82 percent in the second quarter, up from 0.07 percent in the first quarter and 2.60 percent in the same period last year. The industrial sector, which had grown by 3.72 percent in the second quarter of 2024, nearly doubled to 7.45 percent in the second quarter of 2025. However, services GDP slowed slightly to 3.94 percent, compared to 4.33 percent in the previous quarter. Services, agriculture, and industries contributed 56.53 percent, 26.17 percent, and 17.31 percent to overall GDP respectively.

Experts noted that the latest GDP report confirms the economy is on the right track, though more coordinated policies are needed to deepen productivity. The Chairman of the Nigeria Economic Summit Group (NESG), Niyi Yusuf, said the report highlights the benefits of ongoing macroeconomic reforms, while urging the government to do more to unlock the economy’s full potential. “This is steady progress in the right direction. We need to stay the course, maintain momentum, and drive for broad-based growth across all sectors. Pro-growth regulations, predictable justice systems, private sector investment in critical areas, and improved security are all essential to fully unlock the economy’s potential,” he said.

The World Bank also offered a positive outlook on Nigeria’s economy, forecasting three consecutive years of uninterrupted growth. In its June *Global Economic Prospects* report, the Bank projected Nigeria’s growth at 3.6 percent in 2025, 3.7 percent in 2026, and 3.8 percent in 2027. However, it downgraded global growth forecasts for 2025 by 0.4 percentage point to 2.3 percent, citing higher tariffs and growing uncertainty as major headwinds for most economies.

The report noted that global growth in 2025 would be the weakest outside of a recession since 2008, while inflation was projected to reach 2.9 percent, remaining above pre-pandemic levels due to tariffs and tight labor markets. For Sub-Saharan Africa, growth is expected to strengthen to 3.7 percent in 2025 and average 4.2 percent between 2026 and 2027, assuming global conditions remain stable, inflation continues to decline, and regional conflicts ease.

Indermit Gill, World Bank Group Chief Economist and Senior Vice President for Development Economics, warned that “outside of Asia, the developing world is becoming a development-free zone.” Similarly, Ayhan Kose, the Bank’s Deputy Chief Economist and Director of the Prospects Group, observed that emerging and developing economies once benefited from trade integration but now find themselves on the frontlines of a global trade conflict.