Monetary policy: Former Statistician-General positive on trend of real interest rates

NIGERIA’s real interest rates have begun to trend positive, according to Dr. Yemi Kale, former Statistician-General of the Federation.

This development is attributed to the Central Bank of Nigeria’s (CBN) recent monetary policy adjustments, which have led to an increase in nominal interest rates outpacing inflation.

Kale noted that this shift is a welcome sign for savers and investors, as it indicates a more favourable environment for returns on investments.

The positive real interest rates are expected to attract more deposits into the banking system, thereby enhancing financial stability and promoting economic growth. Kale’s observation suggests that the CBN’s efforts to control inflation and stabilise the economy are starting to bear fruit.

Real interest rates are beginning to trend positive. This opens a narrow window for the Central Bank to begin easing rates cautiously by mid- to late-2025. But this will require clear signs that inflation is durably moderating—and that FX stability can be sustained.

Experts describe real interest rate in simple terms as the rate of interest an investor, saver or lender receives (or expects to receive) after subtracting the rate of inflation.

Nigeria’s inflation rate declined to 23.18 percent in February 2025, marking a slight drop from 24.1 percent recorded in January 2025.

On the other hand, the Monetary Policy Committee (MPC) of the Central Bank of Nigeria (CBN) last month retained the Monetary Policy Rate, which is the benchmark interest rate at 27.50 per cent.

Speaking last week at the 2025 Vanguard Economic Discourse, Kale said the broader narrative on asing rates cautiously by mid- to late-2025 is one of structural adjustment, credibility rebuilding, and institution-led reform. But to be clear, none of this will be easy or automatic. It will demand strategic patience, political courage, and unrelenting focus on execution.

Looking ahead into 2025, Nigeria’s macroeconomic outlook is a tale of two narratives: cautious optimism grounded in reform momentum and sober realism framed by global headwinds and deep-seated domestic vulnerabilities, exacerbating economic hardship, he warned.

On GDP Growth, he said the government projects growth at 4.6 percent, but with a more conservative estimate, which places Nigeria’s likely growth in the 3.2 percent to 3.8 percent range.

“And this, I must emphasize, does not yet account for the full spillover effects of escalating global tensions, potential commodity shocks, or trade disruptions,“ he stated, adding that inflation is expected to moderate, falling from over 30peecent in 2024 to around 21 percent in 2025, and potentially 16.4percent by 2026—provided reforms continue and external shocks remain limited. However, this forecast is fragile. Key price drivers such as food and energy remain structurally misaligned, and any supply-side disruption can quickly reverse these gains.

Kale said the naira is likely to stabilize around N1,560 per US dollar, assuming reform consistency and sustained portfolio inflows.

But again, this stability hinges on continued confidence in Nigeria’s monetary policy framework, fiscal coordination, and market discipline.

He identifies key Economic Trends and Structural Bottlenecks that inhibit ongoing reforms in the country.

“As we assess Nigeria’s trajectory, one truth becomes clear: we are experiencing a dual economic reality.

“On one hand, we are laying the policy foundations for long-term transformation: FX market reforms, removal of distortive subsidies, and a more transparent fiscal framework. On the other hand, Nigerians are grappling with crushing inflation, high unemployment, and a cost-of-living crisis that is testing the social contract.

“This duality creates both opportunity and urgency. For policymakers and business leaders alike, this is not a moment for complacency. It is a moment for clarity of vision, coordination, and bold—but empathetic—policy action, “ Kale emphasized.

On Nigeria’s ambition to attain a $1 trillion economy by the end of President Bola Tinubu’s administration, he stated, “to reach a $1 trillion economy by the end of this administration’s term, Nigeria would require annual growth rates in excess of 40 percent—a pace that is virtually unprecedented and, under current conditions, simply unachievable,” Kale stated.

His comments directly contrast with President Tinubu’s optimism that Nigeria is on track to become a $1 trillion economy by 2030. The President had cited a 3.46 percent GDP growth recorded in Q3 2024 as a sign of progress.

Available data from the National Bureau of Statistics (NBS) indicates that GDP grew by 3.84 percent in Q4 2024—its fastest pace in three years—driven by a 5.37 percent expansion in the services sector. Still, experts argue that the country needs a much higher growth rate to meet its long-term targets. Some economic analysts peg the required growth rate at a minimum of 38 percent.

Kale warned that basing the trillion-dollar goal on nominal currency effects or rebasing the GDP would be misleading. “If the target relies primarily on GDP rebasing or nominal currency effects, we risk projecting the illusion of growth without corresponding improvements in productivity, welfare, or structural competitiveness,” he warned.

He noted that even over a longer period—spanning two terms of government (six to eight years)—sustaining the level of double-digit real growth required would be extremely difficult.

“Though this level of growth is not impossible, it is immensely difficult—and it will require much more than macroeconomic stabilization,” Kale said.

Achieving such a target, according to him, would require deep structural reforms, significant improvements in productivity across key sectors, and massive investments in human capital and infrastructure. “But perhaps most critically, it requires a fundamental shift in Nigeria’s development paradigm,” he added.

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