Comercio Partners has released the fifth part of its report examining 10 years of Nigeria's money market and living costs, highlighting significant shifts in interest rates and inflation between 2016 and 2026. The report shows that the Monetary Policy Rate (MPR) rose from 14% in 2016 to 27.50% in 2026, while the consumer price index (CPI) increased by over 300% during the same period.
Money Market Trends Over the Decade
According to the Comercio Partners report, the Nigerian money market experienced substantial volatility over the 10-year period. The MPR was adjusted multiple times by the Central Bank of Nigeria (CBN) in response to inflationary pressures and economic conditions. In 2016, the MPR stood at 14%, but by 2026 it had climbed to 27.50%, reflecting the CBN's aggressive tightening stance to combat rising inflation.
The report notes that the Treasury bill rate also fluctuated significantly, peaking at 18% in 2024 before declining to 14% in 2026. This decline was attributed to improved liquidity in the banking system and reduced government borrowing. The average yield on money market instruments ranged from 12% to 18% over the decade, with the highest yields recorded in 2024.
Living Costs and Inflation Impact
The Comercio Partners report detailed how living costs have surged in Nigeria over the past 10 years. The CPI, which measures the average change in prices paid by consumers for goods and services, increased by 312% between 2016 and 2026. Food prices rose by 350%, while transportation costs increased by 280% during the same period.
"The rise in living costs has been driven primarily by currency depreciation, supply chain disruptions, and energy price increases," the report stated. "Households have had to allocate a larger share of their income to basic necessities, reducing disposable income for savings and investments."
Key Drivers of Market Changes
Several factors influenced the money market and living costs over the decade, according to the Comercio Partners analysis. The naira depreciated by over 200% against the US dollar from 2016 to 2026, moving from N305 per dollar to N1,600 per dollar. This depreciation increased import costs, which contributed to higher consumer prices.
Additionally, the report highlights that the CBN's foreign exchange policy shifts, including the introduction of the Investors' and Exporters' (I&E) window in 2017 and the unification of exchange rates in 2023, created volatility in the money market. The CBN's open market operations (OMO) also played a role in managing liquidity, with OMO rates ranging from 12% to 20% over the decade.
Implications for Investors and Households
The Comercio Partners report concludes that the 10-year period has reshaped the financial landscape for both investors and households. Investors who focused on money market instruments saw real returns eroded by inflation, with the average real return on Treasury bills being negative in 7 out of the 10 years. For households, the rising cost of living has forced many to adjust their spending patterns, with a greater emphasis on essential goods and services.
"The next decade will require more innovative financial strategies to preserve purchasing power and achieve growth," the report noted. "Policymakers must address structural issues in the economy to stabilize prices and improve living standards for Nigerians."
