CBN Eyes single-digit inflation as MPC retains all Parameters
The Central Bank of Nigeria (CBN) has said its target is to reduce inflation to a single digit in the medium to long term, following the rebasing of the Consumer Price Index(CPI) and subsequent decline in inflation to 24.48 percent.
CBN Governor Olayemi Cardoso disclosed this during a press conference following the first Monetary Policy Committee (MPC) meeting of year.
Cardoso stated that the MPC, decided to maintain all key monetary policy rates, including the Monetary Policy Rate (MPR) at 27.50 percent, the asymmetric corridor around the MPR at +500/-100 basis points, the Cash Reserve Ratio (CRR) at 50.00 percent for Deposit Money Banks and 16.00 percent for Merchant Banks, and the Liquidity Ratio at 30.00 percent.
He noted that CBN’s current monetary policies are yielding positive results adding that that inflation is trending downward.
Throwing more light on the impact of the rebased Consumer Price Index (CPI), Cardoso said that the lower inflation figure should not be misconstrued.
He noted that inflation is gradually declining, supported by the recent stability and appreciation of the foreign exchange rate, with the differential between the official and parallel markets now less than one percent.
Speaking on concerns about the impact of elevated borrowing costs on economic growth, Cardoso assured that the CBN’s primary objective is to stabilize the foreign exchange and financial markets.
He said the apex bank is confident that such stability would attract increased foreign investments, stimulating the much-needed economic growth. He also highlighted the competitiveness of the Nigerian currency, which has spurred growing interest from international investors.
The MPC noted several factors expected to positively influence price dynamics in the near to medium term, including the stabilization of the foreign exchange market, the moderation of Premium Motor Spirit (PMS) prices, and the federal government’s efforts to improve security in food-producing areas. The Committee emphasized the need for continued collaboration between monetary and fiscal authorities to maintain and build upon these gains.
Additionally, the MPC acknowledged improvements in the external sector, with the convergence of exchange rates between the Nigeria Foreign Exchange Market (NFEM) and Bureau de Change (BDC) operators.
The Committee commended the CBN’s recent measures, such as the Electronic Foreign Exchange Matching System (B-Match) and the Nigeria Foreign Exchange Code, aimed at enhancing transparency and credibility in the forex market.
Cardoso stated that improved oil production, reaching 1.54 million barrels per day by the end of January 2025, would strengthen Nigeria’s current account position and positively impact external reserves. Despite prevailing macroeconomic challenges, the MPC observed that the banking sector remains resilient.
However, the Committee urged the CBN to maintain vigilant oversight, particularly in light of ongoing banking system recapitalization, ensuring that only quality capital is injected.
The MPC expressed confidence that recent monetary and fiscal policy measures would attract increased foreign direct investment, portfolio inflows, and diaspora remittances as investor confidence grows.
