Monetary Policy
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Africa’s most industrialised economy is among several across the continent easing monetary policy this year. Zambia cut its key lending rate for the first time in more than five years, while Nigeria, Ghana, Egypt, and Kenya have also lowered rates.
The Bank of Zambia has reduced its key lending rate for the first time in over five years, citing slowing inflation in Africa’s second-largest copper and cobalt producer.
The decision comes three days after S&P Global Ratings upgraded the country’s sovereign rating outlook to “positive” from “stable,” citing stronger growth prospects and rising per capita income.
The central banks also moved to ease monetary transmission and spur credit growth by lowering the Minimum Reserve Requirement on rupee-denominated deposits from 13% to 10%, effective October 8.
Inflation, currency volatility, and debt stress continue to shape Africa’s monetary path in 2025, prompting tighter policies in fragile economies and gradual easing where stability has improved.
Consumer prices have eased sharply from last year’s highs, however, erratic movements and a slight uptick in September 2025 point to persistent price pressures.
The shift in market sentiment comes as yields on government securities continue to fall, narrowing the risk premium between fixed income and equities.
The Central Bank of Kenya insists that the move will offer further support to credit expansion and sustain the country’s growth trajectory while ensuring that prices remain stable.
Last week, the CBE cut its overnight deposit rate by 100 basis points to 21%, its fourth consecutive reduction this year and the lowest level in two years.
Muhammad Sanusi II, Emir of Kano and former central-bank governor, warns that Nigeria’s early monetary loosening risks reigniting inflation and undoing recent gains in economic stability.
The 100 basis point cut was loosely in step with market expectations and follows a steady decline in inflation since mid-year.
Ethiopia’s Central Bank has raised the banking sector credit cap to 24%, despite plans to fully lift the Cap as planned in September, amid falling inflation.
The Central Bank of Kenya (CBK) has unveiled draft regulations requiring all credit guarantee firms operating in the country to hold a minimum core capital of KES 1 billion ($7.86 million).
The naira has climbed to its strongest level in eight months following the Federal Reserve’s first rate cut of the year, though analysts still expect it to face modest pressure as 2026 unfolds.
Explore Nigeria’s Reserve Requirement Ratio (2005–2025), its impact on liquidity, inflation, and banking stability over 20 years.
The unanimous move marks a turn from one of the most aggressive tightening cycles in the bank’s history and broadly aligned with market expectations.
The appointment announced on Friday comes as Ethiopia grapples with currency instability, heavy debt obligations and an ambitious programme to liberalise its financial sector.
The hold decision comes despite a bigger-than-expected drop in annual inflation to 3.3% in August for the first time in six months
The Bank of Ghana said the move reflected continued disinflation and confidence that price growth would return to target of 6-8% before year-end.
Nigeria’s easing headline inflation reflects a broader trend across key African economies in August 2025, with Kenya standing as the outlier.