Nigeria’s rate cut narrows carry-trade edge against Ghana

ABUJA, Nigeria — Nigeria’s interest-rate differential over inflation narrowed to 7.61 percentage points after the Central Bank of Nigeria (CBN) cut its benchmark rate by 350 basis points to 23% on September 22, 2026, leaving Ghana with a wider 9 percentage-point differential.

Kanyi Daily reports that Nigeria’s 23% policy rate now stands against headline inflation of 15.39%, while Ghana’s 14% policy rate compares with 5% inflation. The difference has raised questions about the relative attractiveness of the two markets to investors seeking carry-trade returns.

In Nigeria, the policy rate was reduced from 26.5% to 23% at the CBN’s 307th Monetary Policy Committee meeting. Ghana has maintained its policy rate at 14%, giving it a wider gap despite having a substantially lower nominal interest rate.

Chief Executive Officer of the Financial Derivatives Company (FDC), Bismarck Rewane, said Nigeria’s real return remained attractive after the rate cut. “The real rate of return for investors dropped from above 11%, around 11.1%, to 7.61%. It is still very attractive for those involved in carry trade,” Rewane said.

Rewane added, “We were previously at more than 11 percentage points; we are now at about 7 percentage points. It means that if you take your money to the United States and invest it, after accounting for inflation, your return on investment could still be lower than if you kept it in Nigeria.”

The comparison also places Nigeria above South Africa, whose policy rate of 7% against inflation of 4.3% gives a 2.7 percentage-point differential, and Kenya, where an 8.75% policy rate against 6.59% inflation gives a 2.16 percentage-point gap.

Rewane said the rate cut had not produced a major immediate reaction in the naira’s parallel-market value. He said the currency “stayed flat at about N1,387” and briefly moved to about N1,390, equivalent to roughly US$1.00 at the reported parallel-market rate of about ₦1,389 per US dollar.

Nigeria’s MPR has declined from 27.25% in September 2024 to 23%, while inflation has also fallen over the period. Rewane said the trend indicated progress on price stability but warned that lower interest rates could reduce returns on naira savings and encourage some investors to seek alternative assets.

He also said savings rates could face further pressure because “savings are a function of interest rates,” while higher demand for dollars and other assets could emerge if returns on naira deposits fall.

The rate cut comes as Nigeria’s inflation rate stood at 15.39% in August and Ghana’s inflation rate reached 5%. The differentials between policy rates and inflation are likely to remain a key consideration for investors assessing the relative returns available across African markets.