ABUJA, Oct 26 – Nigeria aims to reduce inflation to single digits before the end of 2027, creating room for significantly lower interest rates to reduce borrowing costs and support economic growth, Finance Minister Taiwo Oyedele said on Monday.
Speaking at the Nigeria Economic Summit, Oyedele argued that lower financing costs could unlock investment and expand economic activity, particularly as businesses currently face borrowing rates far above the country’s economic growth rate.
“If you are growing at 4.43% and borrowing at close to 30%, imagine what is possible when you borrow at single-digit rates,” Oyedele said.
Nigeria’s headline inflation remains around 15%, while the Central Bank of Nigeria’s benchmark interest rate stands at 23%. The combination has kept financing costs elevated and household purchasing power under pressure, with the country approaching a national election.
Oyedele said the government’s economic reforms were already delivering benefits but that policymakers wanted to accelerate progress so household incomes could rise faster than prices. Lower inflation and interest rates, he said, would help stimulate investment and accelerate growth.
The proposed inflation target represents a significant ambition for an economy that has experienced persistent price pressures following major policy changes, including the removal of fuel subsidies and the devaluation of the naira.
Balancing reforms with cost-of-living pressures
Since President Bola Tinubu took office in 2023, his administration has implemented reforms aimed at improving public finances, strengthening foreign reserves and restoring investor confidence. These measures have included scrapping fuel subsidies and allowing a substantial adjustment in the exchange rate.
The reforms have improved aspects of the government’s fiscal position and financial outlook, but they have also contributed to a severe cost-of-living crisis, with households facing higher transport, food and other essential expenses.
Oyedele said policymakers were willing to adjust their approach where evidence showed that particular measures were not working. He also urged critics to engage with the details of government policy rather than rely on “emotion” or incomplete narratives.
Achieving single-digit inflation would require a sustained reduction in price pressures, potentially allowing monetary policymakers to ease interest rates if economic conditions permit. However, the government’s target does not guarantee that borrowing costs will fall to single-digit levels within the same period.
For businesses, lower interest rates could reduce financing costs, support capital expenditure and improve the viability of investments that are difficult to fund at current lending rates. The broader impact would depend on how quickly inflation declines, the response of monetary policy and whether banks pass lower funding costs on to borrowers.
Nigeria’s policy challenge is to sustain the gains from its economic reforms while easing the pressure on households and businesses. The pace of disinflation will be central to whether the government can achieve its 2027 target and create conditions for more affordable credit and stronger economic growth.
