Nigeria's central bank cuts key rate to 23% in surprise move

Nigeria's central bank lowered its benchmark lending rate by 350 basis points to 23% on Tuesday, a surprise decision it described as a step to strengthen the transmission of monetary policy.

The move defied expectations: all seven economists surveyed had forecast that the Central Bank of Nigeria would hold the rate at 26.5% for a third consecutive policy meeting.

Governor Olayemi Cardoso told a press conference that the reduction amounted to "an operational reset to enhance the effectiveness of monetary policy and support the transition to an inflation-targeting framework".

The Monetary Policy Committee, in reaching its decision, observed that market rates had moved away from the benchmark lending rate, weakening the effect of policy, Cardoso said.

Headline inflation in Africa's most populous nation has moderated slightly since the previous policy meeting in July. Cardoso said members noted that the easing reflected the impact of earlier tightening, sustained exchange rate stability and improved inflation expectations.

That downward trend, however, could soon lose momentum as domestic fuel prices climb to record highs.

Analysts had anticipated a cautious stance because of the risks posed by fuel and food prices.

The country is due to hold a general election in January, with cost-of-living pressures expected to feature prominently as President Bola Tinubu seeks re-election.