Recent data from the Central Bank of Nigeria (CBN) shows that inter-bank call rates surged to 28.58% in January 2025, a sharp increase from 16.43% in the same month of the preceding year. The increment correlates with the movement in the CBN Monetary Policy Rate from 18.75% in January 2024 to 27.50% in 2025. High interbank rates make banks on lend at a higher rate. This, in turn, raises borrowing costs for businesses, potentially slowing economic activity. While the CBN's monetary tightening aims to curb inflation by reducing excess liquidity, excessively high rates risk stifling investment in critical sectors of the economy, and thus, hampering growth. To address excess liquidity challenges without over-relying on rate hikes, policymakers should consider complementary fiscal measures such as fiscal discipline to eliminate the effect of fiscal deficit financing on rising inflation. The government's efforts should prioritize curbing inflation, which is likely to pave the way for lower monetary policy rates and inter-bank call rates. High interest rate increases cost of borrowing, lowers investment levels and the pace of economic growth. 

The CBN Business Expectations Survey (BES) for February 2025 reflects growing optimism among businesses regarding Nigeria’s macroeconomic environment. The Overall Business Outlook Index for the current month stood at 19.7, with all sectors expressing positive expectations. The industry sector recorded the highest optimism, suggesting strong confidence in future economic conditions. Businesses also anticipate an appreciation of the Naira in the coming months, reflecting improved foreign exchange expectations. Sector-specific indices further reinforce this positive sentiment. The Business Outlook Index for Industry stood at 21.8, followed by Agriculture at 20.9, and Services at 18.1, indicating broad based confidence in business growth. The Business Confidence Index (BCI) further highlights sectoral optimism. Mining and Quarrying recorded the highest confidence at 16.0, followed by manufacturing and agriculture at 6.8 each, Market Services at 4.6, Non-Market Services at 3.1, and construction at 1.8. While the overall outlook remains positive, businesses continue to monitor key economic variables, including inflation and access to credit. Sustaining this optimism will require consistent policy support, structural reforms, and measures to enhance economic stability

In February 2025, the headline inflation rate eased to 23.18%, decreasing by 1.30% relative to the January 2025 inflation rate of 24.48%. Food inflation declined by 2.57 percentage points to 23.51% from the 26.09% recorded in January 2025. Furthermore, urban inflation stood at 25.15% and rural inflation decreased to 19.89%. This continued decline is still attributable to the National Bureau of Statistics' rebasing of the consumer price index in January 2025.

According to the IMF World Economic Outlook(WEO) for January 2025, Nigeria’s economic growth forecast was revised upward by 0.1 percentage point, from 3.1% in the October 2024 report to 3.2% in the January 2025 report. However, the forecast for 2026 was downgraded by 0.2 percentage point to 3.0%. Key factors driving this downward projection include the anticipated decline in external financing for many Sub-Saharan African countries, the depreciation of the Naira against the dollar, and tighter global financing conditions, which will exacerbate debt burdens for developing countries including, Nigeria. For Sub-Saharan Africa as a whole, the IMF projects economic growth of 4.2% in 2025, a 0.4 percentage point increase from the 3.8% recorded in 2024. Inflation is also expected to decline, reaching 4.2% in 2025 and 3.5% in 2026. Nigeria’s GDP forecast is 1.1 percentage points below the Sub-Saharan African countries average. While the projected growth rate is positive, it is too low to significantly boost per capita income. The moderate growth projection is likely to be undermined by long-term risks, particularly the unpredictable nature of the exchange rate, which deters investment decisions. Additionally, Nigeria’s public finances remain vulnerable if borrowing costs stay high and revenue generation remains weak. Therefore, the government must carefully manage inflation and strengthen tax administration processes to enhance domestic revenue collection.

According to the latest data from the Money and Credit statistics of the Central Bank of Nigeria (CBN), currency outside banks soared year on year by 44.46%, to ₦4.7 trillion by January 2025 up from ₦3.3 trillion in January 2024. Currency outside the bank represents 12.8% of narrow money in January 2025, an increase from 10.4% in January 2024. Also, currency outside banks as a percentage of total money supply (M3) increased in January 2025 to 4.3% from 3.5% last year. The statistics suggest a growing preference for cash based payments and an expansion of the informal economy.
Moreover, an increase in the proportion of currency circulating outside banks impedes the transmission of monetary policy signals through interest rate adjustments, which is critical for the effectiveness of monetary policies. To address this pressing issue, urgent corrective measures need to be implemented. These measures could include reducing bank charges to incentivize greater participation in the formal banking system, expanding banking infrastructure, especially in underserved areas, and strengthening mechanisms for addressing payment failures associated with interruptions in internet service