Nigeria’s Minister of Finance and Coordinating Minister of the Economy, Wale Edun, has signaled the possibility of further interest rate cuts if the country’s inflation trend continues to cool, raising hopes of lower borrowing costs and fiscal relief for the government.
Edun made the remarks in an interview on the sidelines of the Abu Dhabi Sustainability Week, according to a report by Bloomberg.
He said sustained disinflation would create room for additional monetary easing, helping to reduce borrowing costs while easing the growing burden of debt servicing on public finances.
“If inflation continues on a downward path, there will be scope for rate reductions,” Edun said, noting that lower inflation and cheaper borrowing would free up revenues currently absorbed by debt servicing and improve Nigeria’s fiscal balance.
The comments come at a time when Nigeria’s budget is under intense strain from high debt-servicing costs, volatile oil revenues, and a widening fiscal deficit—making any reduction in borrowing costs economically significant.
Edun commended the Central Bank of Nigeria (CBN) for what he described as “excellent” progress in tackling inflation, attributing recent gains to aggressive monetary tightening over the past two years. During that period, the CBN more than doubled its benchmark interest rate from 2022 levels in an effort to curb inflationary pressures.
In September, the apex bank implemented a 50-basis-point rate cut, bringing the monetary policy rate to 27 percent, following a sharp moderation in inflation from its late-2024 peak.
Despite these developments, Nigeria’s fiscal outlook remains challenging. Under the proposed 2026 budget, more than a quarter of the N58 trillion spending plan—estimated at about N40 billion—is earmarked for interest payments alone.
Projected revenues of approximately N34 trillion, constrained largely by subdued oil receipts, leave a budget deficit of about N24 trillion, or 4.3 percent of gross domestic product—wider than the deficit recorded the previous year.
Edun noted that lower interest rates would not only support economic growth but also provide much-needed fiscal breathing room by reducing the share of government revenue devoted to servicing debt. With oil revenues remaining volatile and deficits expanding, Nigeria’s fiscal sustainability has become increasingly sensitive to inflation trends and borrowing costs.
He added that the government’s borrowing strategy would remain flexible and market-driven, with decisions on domestic and external issuances guided by pricing, timing, investor demand, and strict adherence to debt limits set out in the medium-term expenditure framework.
Beyond monetary policy, Edun said the administration is stepping up efforts to boost revenue mobilisation and reduce dependence on borrowing.
These include structural reforms and improved efficiency in revenue collection, particularly through a directive mandating ministries, departments, and agencies to halt cash collections and fully transition to automated payment platforms to enhance transparency and curb leakages.
The government, he said, is also banking on proceeds from privatisation, divestments by the Nigerian National Petroleum Company (NNPC), and increased crude oil production to help fund the budget and strengthen the country’s fiscal position.
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