MPC: Consolidating Positive Macroeconomic Development Signals.
The 299th meeting Monetary Policy Committee (MPC) of the Central Bank of Nigeria (CBN) held on the 19th and 20th of February 2025 to review recent economic and financial developments as well as assess the risks to the outlook for 2025 was ,no doubt, unique : it marks a pause in rate hikes after six consecutive increases in 2024 as the members of the Committee agreed to consolidate some current positive macroeconomic developments to optimize benefits of the reforms under the leadership of Olayemi Cardoso.
All the twelve members of the Committee were in attendance unanimously voted to hold all parameters against certain speculations in some quarters that the Committee might review some of its downward or upward.
It retains the MPR at 27.50 per cent , the asymmetric corridor around the MPR at +500/-100 basis points, the Liquidity Ratio at 30.00 per cent while the Cash Reserve Ratio of Deposit Money Banks at 50.00 percent and Merchant Banks at 16 per cent.However ,the meeting reaffirmed the CBN’s commitment to maintaining price stability and fostering a more transparent foreign exchange market.
Moreover ,the meeting reaffirmed the CBN’s commitment to maintaining price stability and fostering a more transparent foreign exchange market.
Justifying the outcomes of the meeting Cardoso said, “as far as the central bank is concerned, we are data-driven, and that will continue. Our decision matrices will be focused accordingly,”
The Committee believed that the key macroeconomic variables have continued to evolve in a positive direction in line with the current stance of macroeconomic policy and should be allowed more time to fully manifest. In other words, by keeping rates unchanged, the central bank aims to give ongoing policy measures more time to take full effect before considering any adjustments.
Consequently , the decision is purposely to consolidate some positive macroeconomic development signals attributed to the current the monetary reforms under the leadership of Olayemi Cardoso , the Governor of CBN
Some of the macroeconomic development signals that influenced the decision to retain the above rates and expected to positively impact price dynamics in the near to medium term include the stability in the foreign exchange market, improvements in external reserves, and a gradual moderation in fuel prices ; the point is that when those recent macroeconomic developments optimize their positive impacts on the economy , the regulatory authorities could then go for the much expected adjustments.
Stability in the Foreign Exchange Market
The Committee noted the stability in the foreign exchange market achieved by the current MPR at 27.50 per cent led to the appreciation of the exchange rate and the .gradual moderation in the price of Premium Motor Spirit (PMS) .A stable exchange rate market has several implications for the economy, businesses, and individuals:encourages international trade, as businesses can better predict costs and revenues ;Foreign Investment ; attracts foreign investors, promoting economic growth and development; helps to reduce inflation by minimizing the impact of exchange rate fluctuations on import prices ; boosts confidence in the economy, encouraging domestic investment and consumption and makes it easier for businesses and individuals to plan financially, as they can better predict future costs and revenues. A stable exchange rate can also encourage fiscal discipline, as governments are more likely to manage their finances prudently to maintain exchange rate stability , reduce the risk associated with currency fluctuations, making it easier for businesses to engage in international trades and can facilitate economic integration with other countries, promoting regional trade and cooperation.
Inflationary Slowing Trajectory
The Committee noted that core inflation remains a concern, even as recent data indicates a slowing trajectory. Food prices continue to exert upward pressure, and thus, premature monetary easing could reverse recent gains,” the communique stated.
However ,the Committee believed the positive impact should be allowed to be fully exploited before any adjustment or review is made
The reason for this may not be far to seek . Despite that positive signal on the economic horizon its members were not oblivious of the risk of persisting inflationary pressures driven largely by food prices.
Governor Cardoso emphasized that while the exchange rate has begun to appreciate due to recent monetary interventions, the committee remains cautious about inflationary risks, particularly food inflation.
The above potential risk notwithstanding , the Committee is equally optimistic that the Federal Government continued improved security in food producing communities supported by other measures has the tendency to enhance food supply and to moderate food prices .The “improved security measures in agricultural regions, coupled with policy actions to enhance food supply, should support the continued moderation of inflation in the coming months.”
With the recent rebasing of the Consumer Price Index update analysis below, the headline inflation stood at 24.48 per cent year-on-year in January 2025, down from 34.80 per cent in December 2024 under the previous base year.
The Rebasing of the Consumer Price Index
The Committee also noted the positive signal from the recent rebasing of the Consumer Price Index (CPI) by the National Bureau of Statistics (NBS) which reviewed the weights of items in the consumption basket to reflect current consumption patterns .
The rebasing exercise is another signal that encouraged the Committee to retain its rates since the consumption basket now better reflects current realities .
The Governor praised the NBS for this improvement, noting, “We will, you know, continuously look at data, and our decision matrices will be focused accordingly. Of course, we have a CPI, which reflects the reality of consumption patterns.
“And that’s a good thing. For example, the previous one that we had took account of black and white television which we all know is no longer relevant. So to that, to that extent, really, one, commends the efforts of the NBS in bringing.”
A rebasing exercise is expected to provide a more accurate picture of the economy. ,enable policymakers to make informed decisions based on updated data, facilitate cross-country comparisons and enable countries to assess their economic performance relative to others. Nigeria, for example, conducted a rebasing exercise in 2014, which led to an 89% increase in its GDP, making it the largest economy in Africa at the time.
Collaboration Between the Monetary and Fiscal Authorities
The Committee members reiterated the current benefits of increased collaboration between the monetary and fiscal authorities, demonstrated at the recently concluded Monetary Policy Forum organized by the Bank. The MPC thus urged the continued strengthening of this collaboration to achieve the mutually beneficial objectives of price stability and sustainable growth. It lauded the recent Monetary Policy Forum, which brought together key stakeholders, including the Minister of Finance, Minister of Budget and Planning, and representatives from the private sector.
Cardoso reaffirmed the need for continued engagement, stating, “Coordination between fiscal and monetary policy is crucial to sustaining the progress we’ve made. Our recent engagement with fiscal authorities and private sector leaders ensures that our policy actions are aligned to drive economic stability.”
Economic Growth and External Reserves
The MPC reviewed economic growth data, with real GDP expanding by 3.46 percent in Q3 2024, up from 3.19 percent in Q2. The non-oil sector remained the primary driver of growth, although improvements in oil production, which stood at 1.54 million barrels per day in January 2025, were seen as positive for Nigeria’s external balance.
The external reserves were reported at $39.4 billion as of February 14, 2025, providing an import cover of 9.6 months. The Balance of Payments remained strong, with a positive current account balance of $6.06 billion as of Q3 2024.
Exchange Rate Stability and FX Reforms
A major highlight of the MPC meeting was the progress in stabilising the foreign exchange market. The Committee noted the convergence of rates between the official Nigeria Foreign Exchange Market (NFEM) and the Bureau de Change (BDC) segment, attributing the improvement to the recent introduction of the Electronic Foreign Exchange Matching System (B-Match) and the Nigeria Foreign Exchange Code.
Cardoso stated, “We are ensuring a foreign exchange market that is deep, open, transparent, and allows for easy entry and exit. We have seen significant improvements in diaspora remittances, and the differential between the official rate and the BDC rate has narrowed to less than one percent.”
The MPC is, thus, of the view that following major policy measures undertaken by the monetary and fiscal authorities, the flow of foreign direct and portfolio investments as well as diaspora remittances are expected to increase as investor and stakeholder confidence improves. Furthermore, the improvement in oil production, which was 1.54 million barrelsper day (mbpd) at the end-January 2025, will enhance the current account position of the Balance of Payments with the attendant positive impact onexternal reserves.
Financial Sector Stability
The MPC observed that despite pockets of macroeconomic headwinds confronting the Nigerian economy, the banking system has remained robust and resilient. Members, however, urged the Bank not to relent on its keen surveillance of the banking system, especially at a time of significant exogenous and endogenous headwinds.
In addition, Members called on theManagement of the Bank to closely monitor the ongoing recapitalization of thebanking system to ensure the injection of quality capital as envisaged in theframework.
ATM Charges and Consumer Impact
Another key topic that emerged from the discussions was the recent adjustment in ATM withdrawal charges. The CBN reiterated its stance on ensuring fair banking practices and addressing consumer concerns regarding excessive fees.
While some may perceive this measure as adding to economic burdens, it is, in fact, a strategic step to ensure better cash accessibility for Nigerians. This policy emerged from our efforts to address cash shortages, particularly during the peak demand period around the holidays, when many faced undue hardship. and long-term solutions to ensure cash availability.
“Fundamentally, banks need to be incentivised to keep ATMs stocked and accessible, ensuring that customers can withdraw money conveniently. While access has improved, it must become seamless and reliable. This measure encourages banks to invest in expanding ATM networks and maintaining efficient cash distribution.”
“Importantly, customers withdrawing from their own banks will not incur charges, and those who frequently use another bank’s ATM can apply for a card from that institution at no extra cost.
“Ultimately, this policy aims to enhance financial access, increase ATM deployment, and eliminate exploitative cash withdrawal practices, fostering a more efficient and consumer-friendly banking system.”
Outlook and Policy Direction
Looking ahead, the MPC highlighted that while inflationary pressures have moderated, food prices remain a concern. Members expressed optimism that improved security in agricultural regions and other supply-side interventions would help sustain the downward trend in food inflation.
The CBN reiterated its commitment to maintaining orthodox monetary policies, with Cardoso stating, “We will stay the course. Inflation has been too high for too long, and our objective is to bring it down from double digits to single digits over the medium to long term.”
Overall, the MPC acknowledged the various policies by the Bank, aimed at anchoring inflation expectations, easing exchange rate pressures, deepening financial inclusion, and improving the transmission mechanism of monetary policy.
