Easing inflation, FX market stability steadies Nigeria’s 10-year bond yield

Nigeria’s 10-year bond yield has steadied at 15.95 per cent, easing from 18.73 per cent in June, according to PricewaterhouseCoopers (PwC).

The consulting firm attributes the moderation to easing inflationary pressures, relative stability in the foreign exchange (FX) market, and sustained monetary tightening by the Central Bank of Nigeria (CBN).

The findings are contained in PwC’s latest report titled ‘Mid-Year Review and Updates: H2 2025 Economic Outlook’, released on Tuesday.

The firm noted that improved investor confidence is supporting financial market stability even as credit conditions remain tight.

PwC highlighted that the CBN maintained the Monetary Policy Rate (MPR) at 27.5 per cent in July 2025, up from 27.25 per cent in November 2024, as part of its inflation-fighting strategy. The commercial banks’ Cash Reserve Ratio (CRR) was also retained at 50 per cent.

The report explained that while the lower bond yield reflects optimism, maximum lending rates remained high at 29.78 per cent in Q2 2025, underscoring tight credit conditions for households and businesses.

Headline inflation declined for the fourth consecutive month to 21.88 per cent in July 2025, compared with 22.22 per cent in June. The slowdown was linked to base effects and exchange rate stability. However, PwC cautioned that short-term price pressures persist, as month-on-month inflation rose to 1.99 per cent in July, from 1.68 per cent in June.

PwC projects that inflation will decelerate further in the second half of 2025, buoyed by rebasing effects and the CBN’s tightening stance.

The report also highlighted the CBN’s aggressive measures to stabilise the naira. In the first half of 2025, the apex bank injected $4.1 billion into the FX market, a 215 per cent increase from $1.3 billion in the same period of 2024.

In addition, the CBN introduced new diaspora-focused instruments — the Non-Resident Nigerian Ordinary Account (NRNOA) and the Non-Resident Nigerian Investment Account (NRNIA) — to boost remittance inflows and encourage diaspora participation in the domestic capital market.

Nigeria’s economy received a boost from the recent GDP rebasing exercise, which shifted the base year to 2019. The rebasing expanded the economy from ₦277.5 trillion to ₦372.82 trillion, providing a more accurate measure of economic activity.

Following the adjustment, real GDP grew by 3.13 per cent in Q1 2025, compared with 2.27 per cent in Q1 2024. The strongest growth was recorded in Finance and Insurance (15.03 per cent), ICT (7.4 per cent), Construction (6.21 per cent), and Real Estate (4.61 per cent).

PwC projects overall GDP growth of 3.4 per cent for 2025, supported by higher crude oil output and stronger non-oil sector performance.

PwC expects the CBN to sustain its tight monetary policy in the second half of the year, focusing on achieving long-term price and financial system stability. The firm emphasised that reforms aimed at deepening remittance flows, stabilising the FX market, and strengthening banks’ capital adequacy will be key to sustaining growth momentum.

Despite easing inflation and improved investor confidence, PwC warned that businesses and households will continue to face elevated borrowing costs, with credit conditions remaining constrained in the near term.

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