LCCI predicts decline in inflation and forthcoming interest rate reductions

The Lagos Chamber of Commerce and Industry (LCCI) has offered a cautiously optimistic projection that Nigeria’s inflation rate will continue its downward trajectory, paving the way for imminent interest rate reductions from the Central Bank of Nigeria (CBN). In its latest macroeconomic outlook, the chamber highlighted improving price dynamics, a stabilising naira, and easing food inflation as key factors that could enable the monetary authority to adopt a more accommodative stance.

In recent months, headline inflation has eased from the 24 percent range to the low 22s, while core inflation—excluding food and energy—has moderated to the mid-20s, according to National Bureau of Statistics data. The LCCI noted that the downward trend is well-established, driven by improved food supply, reduced wholesale price pressures, and a relative peak in global oil prices. This easing, the chamber argues, has created room for CBN policymakers to consider easing monetary conditions.

The LCCI anticipates that inflation could drop below 20 percent in the coming months, prompting a shift from the current restrictive policy. Headline inflation is projected to fall within a 19 to 21 percent range by year-end, with food inflation cooling to under 20 percent. Such progress is expected, analysts say, to convince the CBN’s Monetary Policy Committee (MPC) to approve a downward adjustment of the Monetary Policy Rate (MPR) as early as its next meeting.

Current modelling suggests that the chamber will settle on reducing the MPR from its current 21.25 percent by 100 to 150 basis points in the short term. The policy shift, according to LCCI economists, would be justified if inflation expectations are brought under control, foreign exchange stability persists, and price pressures remain subdued.

This forecast marks a departure from the CBN’s aggressive tightening policy since late 2023, during which benchmark interest rates were raised multiple times to arrest rising inflation. The rate hikes, combined with tighter bank credit conditions, contributed to a slowdown in access to finance, elevated borrowing costs, and sluggish investment in housing, manufacturing, and infrastructure.

Despite the high interest rates, inflation has remained above policy comfort, forcing the CBN to maintain restraint. With the latest projections indicating that consumer prices are trending downward, the LCCI has argued that a gradual policy pivot is both opportune and necessary to support private-sector recovery, job creation, and economic growth.

The chamber cautioned, however, that any policy shift must be measured and data-driven. They emphasised the need for caution in light of external risks such as rising global commodity prices, exchange rate volatility, and seasonal food shortages. To avoid premature easing that could undermine gains, the LCCI called for a careful monitoring of core inflation, inflation expectations, and the external environment.

Sectoral reactions to the forecast have been broadly positive. Manufacturers and small business owners, facing eroded profits due to tight liquidity and high energy costs, have welcomed the prospect of lower borrowing costs. “Even a small reduction in the MPR could translate into significant relief on working capital loans, especially for SMEs struggling to operate under restrictive credit terms,” noted one Lagos-based industrialist.

Real estate developers and mortgage financiers are likewise watching closely. Subdued interest for housing loans, attributed to costly debt, could rebound if borrowing becomes more affordable—stimulating activity in construction, cement, and related industries. Banks are reportedly preparing to calibrate lending rates accordingly once official rate decisions are declared.

On the financial markets front, bond traders and fixed-income player groups appear optimistic. Local debt yields have begun to moderate, and improved liquidity may encourage investors to re-enter long-term bonds. Inflows into the fixed-income space—particularly treasury bills and FGN bonds—could rise in anticipation of cooled CBN rates.

Nevertheless, some analysts have urged caution. They argue that Nigeria’s inflation is still elevated by global standards and remains sensitive to exchange-rate developments, especially given the country’s import dependency. They also warn that volatile food production in the North, and insecurity affecting agricultural supply routes, pose inflationary risks. As such, they insist that any policy pivot must be accompanied by robust fiscal and monetary coordination.

The LCCI echoed these concerns and recommended specific complementary actions. Chief among them are continued progress in the unification of exchange rates, accelerated implementation of the Presidential Metering Initiative, and targeted agricultural interventions to cushion food prices during harvest cycles. They also urged improvements in fiscal transparency and infrastructure spending discipline.

The presidential cabinet also recently acknowledged the need to align fiscal spending with monetary policy. Finance officials have hinted that while revenues have improved modestly—thanks to rising oil receipts and non-oil tax enhancement—they continue smoothing public expenditure to reduce inflationary pressure.

As the MPC prepares for its upcoming meeting, due attention will be paid to signals from the Central Bank governor. Recent speeches reiterate the need for inflation to transit into a sustained downward trend before policy easing. Bold comments include pledges to remain data-minded, not calendar-driven, in future decisions. Analysts will be watching closely for nuance in forward guidance—whether it signals a shift toward easing, or continued vigilance.

If inflation continues to moderate and global shocks remain contained, the LCCI forecasts may prove prescient. But they stress that inflation below 20 percent is a critical threshold; until then, cautious monetary policy must persist. The chamber concluded that the real gain will accrue when inflation drops further—into the mid-teens—allowing full throttle economic recovery.

For now, the LCCI’s forecast has injected a measure of upward momentum into business sentiment. A series of manageable rate cuts, backed by policy coherence and structural support, could unlock investment, stimulate growth, and strengthen confidence in Nigeria’s economic trajectory. The key will be execution—whether policymakers allow the recovery narrative to drive early stimulus, or hold the line until macroeconomic stability is firmly entrenched.