Resetting The Economy, CBN Again, Holds the Rate
Expectedly, the Central Bank of Nigeria {CBN} between May 19 – 20, 2025, held the 300th edition of its Monetary Policy Committee (MPC) meeting. Another significant milestone in the Bank’s efforts to steer the ship of the economy towards stability and growth.
Importantly, decisions were taken to protect the economy from the global disruption occasioned by the United States of America’s President, Donald Trump, and his trade tariff policy. At this critical time of economic transition in Nigeria, any of CBN’s decisions on monetary policy matters it is believed would have a far-reaching implication for the economic landscape.
The members of the Monetary Policy Committee (MPC) elected to retain the benchmark interest rate at 27.50%. The decision marks a significant moment in the CBN’s efforts to navigate the complex economic terrain of Nigeria. Members voted unanimously to retain the Monetary Policy Rate (MPR) at 27.50%; retain the Cash Reserve Ratio (CRR) at 50% for Deposit Money Banks and 16% for Merchant Banks. The Committee also retained the Liquidity Ratio (LR) at 30% and the Asymmetric Corridor at +500/-100 basis points around the MPR.
Nigeria’s economy has been facing numerous challenges, which include high inflation, exchange rate volatility, food insecurity, high electricity tariff, banditry, and external sector pressures. Despite these challenges, the economy has remained resilient, with a GDP growth rate of 3.4% in the Q3 of 2024. The CBN’s decision to retain the interest rate reflects its commitment to maintaining stability while supporting economic growth.
The MPC, the CBN Governor said, “noted the relative improvements in some key macroeconomic indicators which are expected to support the overall moderation in prices in the near to medium term. These include the progressive narrowing of the gap between the Nigeria Foreign Exchange Market (NFEM) and Bureau de Change (BDC) windows, the positive balance of payments position, and easing price of PMS”.
“Members also noted with satisfaction, progressive moderation in food inflation, and therefore commended the government for implementing measures to increase food supply as well as stepping up the fight against insecurity, especially in farming communities,” Cardoso stressed
The decision to retain the interest rate as predicted by many market watchers was a thoughtful action, an approach to prioritize policy consistency and stability over potential rate adjustments. It is therefore expected to stabilize fixed-income yields, and credit market activity. It hopes also to support economic growth by maintaining a stable financial system and promoting investment.
The outcome of the meeting therefore, reflects CBN’s commitment to taming inflation, noted presently as the biggest elephant in the room. This, however, is in difference to recent signs of moderation witnessed in the economy.
Practical as the decision was, the CBN, going forward, needs to maintain a cautious position, and must continue on its path of economic stability trajectory, ditto, price control. Being a conservative adherent to orthodox central banking, the Bank must note the importance of a coordinated efforts between fiscal and monetary authorities to sustain economic growth and manage inflation, so as not to repeat the mistakes of the past.
Therefore, to achieve the objectives of repositioning the Central Bank of Nigeria {CBN} as the fulcrum for resetting the economy, the Bank must maintain a cautious stance on monetary policy, prioritizing stability, and inflation control.
Hence, to consolidate on its recent macroeconomic gains, the CBN must continue to leverage the current benchmark of 27.50% interest rate to moderate inflation in particular. The prevailing market condition, and global economic developments caused especially by Donald Trump’s administration may have compelled the members to arrive at the outcome.
Recent inflation rate statistics released by the Nigerian Bureau of Statistics {NBS} may be another plausible reason the Committee considered to arrive at the decision. Inflation rates declined to 23.7% in April 2025 from 24.23% in March 2025.
However, it could be predicted from the views of some financial technocrats that, considering notable achievements of the CBN, it may likely consider a rate cut early in 2026, depending on sustained downward trends in inflation.
The continued effectiveness of Olayemi Cardoso’s economic pills, and the fiscal authorities’ efforts will however go a long way in achieving lower inflation target. The CBN also should intensify its effort in ensuring a stronger Naira, and achieve stable exchange rate. Achieving this is a sure bet to that economic Eldorado envisioned by the CBN Governor.
As the economy continues to navigate complex challenges, the CBN’s policy reform stance will play a vital role in shaping Nigeria’s economic trajectory going forward.
Ademola Bakare, a financial analyst, writes from Abuja.
