CBN Retains Monetary Policy Rate at 27.50%: A Strategic Move Amidst Economic Uncertainty
The Monetary Policy Committee (MPC) of the Central Bank of Nigeria (CBN) has retained the Monetary Policy Rate (MPR) at 27.50% in its latest meeting, a decision that reflects the Committee’s cautious approach to managing the country’s economy amidst ongoing challenges and uncertainties. This move comes as the economy shows signs of improvement, with the MPC noting the relative stability in the foreign exchange market and the progressive narrowing of the gap between the Nigeria Foreign Exchange Market (NFEM) and Bureau De Change (BDC) windows.
The Committee also highlighted the positive balance of payments position and the easing price of Premium Motor Spirit (PMS), which are expected to support the overall moderation in prices in the near to medium term. Furthermore, the MPC commended the government for implementing measures to increase food supply and step up the fight against insecurity, especially in farming communities, which has led to a moderation in food inflation. Food inflation eased to 21.26% in April 2025, down from 21.79% in the previous period, while core inflation also declined to 23.39% in April 2025, compared with 24.43% in March.
Despite these positive developments, the MPC acknowledged underlying inflationary pressures driven by high electricity prices, persistent foreign exchange demand pressure, and other legacy structural factors. The Committee expressed concerns about the recent decline in crude oil prices, attributable to increased production by non-OPEC members as well as uncertainties associated with U.S. trade policy, which present new challenges for fiscal receipts and budget implementation.
In light of these factors, the MPC decided to retain the asymmetric corridor around the MPR at +500/-100 basis points, retain the Cash Reserve Ratio of Deposit Money Banks at 50.00% and Merchant Banks at 16%, and retain the Liquidity Ratio at 30.00%. These decisions are aimed at maintaining stability, anchoring inflation expectations, and ensuring financial stability. The Committee reaffirmed its commitment to prioritizing policies targeted at anchoring inflation expectations and easing exchange rate pressure, and will continue to monitor developments in both the domestic and global environments to inform its policy decisions.
The MPC’s decision to hold policy rates steady is a strategic move to balance economic growth, inflation control, and financial stability amidst ongoing uncertainties. With the next meeting scheduled for July 21-22, 2025, the Committee will continue to assess the economy’s performance and make adjustments as necessary to ensure stability and growth. Overall, the CBN’s decision reflects its commitment to maintaining a cautious approach to monetary policy, given the uncertain policy environment and ongoing global shocks
