November 20, 2025.Cordros Report
The Monetary Policy Committee (MPC) of the Central Bank of Nigeria will hold its final meeting of the year on 24–25 November. For us, recent developments suggest scope for a slightly deeper round of easing than the 50bps cut delivered in September. Globally, financial conditions have eased further following another US Fed rate cut in October, while geopolitical tensions have remained contained. Additionally, the recent US–China trade agreements have helped reduce uncertainty. Domestically, inflation has decelerated more sharply, and FX liquidity has remained robust, with the naira showing strength on the back of the aforementioned. Given a more favourable macroeconomic backdrop, we expect the MPC to adopt a firmer easing bias and lower the Monetary Policy Rate (MPR) by 100bps to 26.00%, while keeping other parameters constant.
Global Uncertainties and Financial Conditions Have Eased Further
Since the September MPC meeting, the global policy environment has become more favourable for risk assets and emerging market (EM) currencies. At its 29–30 October meeting, the US Federal Reserve delivered another 25bps rate cut, bringing the policy rate down to 4.0%. It also halted its balance sheet runoff, signalling a shift toward a more supportive stance. At the same time, the Fed emphasised rising concerns about labour market risks, even as internal divisions deepen over how fast and how far to continue easing. On the other hand, the Bank of England (BoE) has kept Bank Rate at 4.0% but its latest decision was a narrow 5–4 hold (four members voted for a 25bps cut), effectively paving the way for a December cut as inflation appears to have peaked. The European Central Bank (ECB), having already cut several times this year, remains on hold, leaving its three key interest rates unchanged (main refinancing rate: 2.15%; deposit facility rate: 2.0%; marginal lending facility: 2.40%) but continues to stress moderating inflation and soft economic activity. Together, these moves have helped ease global yields and loosen financial conditions marginally.
Furthermore, recent progress on trade has reduced near-term tail risks. The late October Trump–Xi summit in Busan produced a new US–China trade understanding that suspends planned tariff escalations, rolls back some agricultural and fentanyl-related levies, and pauses new export controls on key sectors. While structural tensions remain, the agreement extends the trade truce into 2026, tempering uncertainty around global supply chains. The IMF’s October 2025 World Economic Outlook keeps global growth broadly unchanged at around 3.2% in 2025 and 3.1% in 2026, still below the pre-pandemic rate but consistent with a gradual global slowdown.
Q3-25 GDP Growth: Resilient but Softer Momentum
We estimate that the economy maintained resilient growth in Q3-25, supported primarily by improved business conditions and easing cost pressures. However, seasonal factors, including the peak rainy and lean seasons, along with oil-related disruptions, likely slowed growth somewhat relative to the previous quarter.
The agricultural sector is estimated to have expanded by 2.70% y/y (Q2-25: +2.82% y/y). The slight moderation largely reflects softer crop production during the lean season (typically spans from July to mid-September), partly offset by increased livestock output. In the manufacturing sector (+1.55% y/y vs Q2-25: +1.60% y/y), weaker cement production, owing to reduced construction activity amid heavier rainfall alongside still subdued consumer demand, likely tempered overall manufacturing growth.
By contrast, services growth is projected to have accelerated to 4.38% y/y (Q2-25: +3.87% y/y), with key subsectors such as ICT and financial services continuing to benefit from rising digital adoption, higher electronic transaction volumes, and increased financial intermediation. Growth in the trade subsector may also have improved slightly, supported by a gradual pick-up in consumer spending. On the other hand, tight disposable incomes and elevated borrowing costs are likely to have kept real estate activity subdued.
In the oil sector, the industrial action by the Petroleum and Natural Gas Senior Staff Association of Nigeria (PENGASSAN), which led to the temporary shutdown of several production and export facilities and scheduled turnaround maintenance at key oil assets, constrained crude oil output in Q3-25. Consequently, average crude oil production (including condensates) declined to 1.64 mb/d in Q3-25 from 1.68 mb/d in Q2-25, according to the Nigerian Upstream Petroleum Regulatory Commission (NUPRC) data, while a high base in the preceding year further weighed on oil GDP growth.
Overall, we estimate that real GDP grew by 3.90% y/y in Q3-25 (Q2-25: +4.23% y/y), reflecting softer momentum in both the oil (+11.60% y/y vs Q2-25: +20.46% y/y) and non-oil (+3.60% y/y vs Q2-25: +3.64% y/y) segments. Looking ahead to Q4-25, higher festive spending, the main harvest season, further easing in cost pressures, and improved crude oil production are expected to lift economic activity, with real GDP projected to expand by c. 4.00% y/y. On this basis, we forecast full-year 2025 growth of approximately 3.80% y/y.
Disinflation Deepens on Base Effects and Softer Food Prices
Headline inflation decelerated more sharply than earlier in the year. Inflation moderated by 211bps to 18.02% y/y in September from 20.12% y/y in August before falling to 16.05% y/y in October. This improvement reflects a favourable base effect, better main harvest outcomes, naira appreciation, and the partial unwinding of earlier supply-side price shocks.
The composition of disinflation is also broadly encouraging. Food inflation fell markedly to 13.12% y/y (vs September: 16.87% y/y; August: 21.87% y/y), while core inflation eased to 18.69% y/y (vs September: 19.53% y/y; August: 20.33% y/y), indicating softer price pressures across both food and non-food components. Although the month-on-month outturn ticked up slightly to 0.93% m/m (August: 0.74% m/m), the overall trajectory still points to moderating underlying inflationary pressures compared with the same period a year earlier. With the currency remaining stable, fuel prices steadying, and the main crop harvest ongoing, the moderation in headline inflation is expected to extend into November.
Robust FX Inflows and Reserves Anchor Naira Stability
The naira extended its recent gains over the review period, supported by stronger foreign portfolio inflows and still-subdued import demand. Total inflows into the Nigerian Foreign Exchange Market (NFEM) climbed to a five-month high of NGN5.15 trillion in October, reversing September’s decline (-5.7% m/m to USD3.18 billion). Foreign portfolio investors were the main driver, as inflows surged by 120.7% m/m to USD2.94 billion, accounting for 57.1% of total market receipts. Local FX supply also strengthened, rising by 28.4% m/m to USD1.83 billion, boosted by a sharp jump in transactions from individuals (+370.6% m/m) and non-bank corporates (+30.8% m/m), alongside a modest increase in exporters’ proceeds (+7.2% m/m). In contrast, inflows from the CBN fell by 60.0% m/m, in line with the shift toward more market-driven price discovery.
Against this backdrop, the naira appreciated by 2.8% m/m against the US dollar in October, averaging NGN1,460.35/USD (September: NGN1,501.38/USD) and trading within a tighter NGN1,431.00 – 1,451.00/USD range so far in November. Year-to-date, the currency has gained around 6.0%.
External buffers have improved in tandem. According to the CBN Governor, the gross FX reserves reached USD46.70 billion as of 14 November, implying a year-to-date increase of 18.5%. The build-up has been driven by stronger oil inflows, robust FPI receipts, measured CBN intervention and the successful issuance of the USD2.35 billion Eurobond on 5 November.
Looking ahead, resilient FX liquidity and firm market confidence should keep the naira broadly stable, with the exchange rate projected to close the year at around NGN1,450.00/USD, assuming no major shock to global risk sentiment or oil prices.
MPC May Deepen the Easing Cycle with a 100bps Cut
The Monetary Policy Committee (MPC) has maintained a cautious posture on interest rate adjustments in previous meetings, despite persistent disinflation and naira stability. This restraint largely reflects the slow pace of inflation moderation alongside elevated global uncertainties, amplified by higher global tariffs and uneven risk sentiment. Although the MPC, for the first time in over five years, initiated an easing cycle by cutting the MPR at the September policy meeting, the modest 50bps reduction and the Committee’s guarded tone underscored its aim to avoid premature policy relaxation.
However, the balance of risks has shifted meaningfully in recent months. For us, a more favourable global backdrop, faster domestic disinflation, and sustained naira appreciation collectively strengthen the case for a more decisive monetary easing stance. Given these improvements, we believe the MPC is now in a stronger position to extend the easing cycle and could opt for a 100bps cut in the MPR to support growth while still keeping its inflation goals in focus. This would bring the MPR to 26.00% by year-end. On the other hand, we expect all other policy parameters to be retained, reflecting the Committee’s preference for a measured and orderly recalibration of monetary conditions.
