The Monetary Policy Committee (MPC) of the Central Bank of Nigeria (CBN) has made a strategic decision to retain the Monetary Policy Rate (MPR) at 27.50%. This move is aimed at maintaining stability and anchoring inflation expectations in the face of ongoing economic uncertainties. Also , by retaining the MPR at 27.50%, the Committee is signaling its intention to maintain a cautious approach to monetary policy, given the uncertain policy environment and ongoing global shocks.
Additionally, the Committee has retained the asymmetric corridor at +500/-100 basis points around the MPR to manage liquidity and interest rates, ensuring that the financial system remains stable and supportive of economic activity.
Furthermore, the MPC has retained the Cash Reserve Ratio at 50.00% for Deposit Money Banks and 16% for Merchant Banks to control liquidity and ensure financial stability, thereby preventing excessive risk-taking by banks. The Committee has also retained the Liquidity Ratio at 30.00% to ensure that banks maintain adequate liquidity, preventing liquidity shortages and maintaining confidence in the financial system.
The MPC’s decision reflects its commitment to prioritizing policies that anchor inflation expectations and ease exchange rate pressure. By retaining the MPR at 27.50%, the Committee is signaling its intention to maintain a cautious approach to monetary policy, given the uncertain policy environment and ongoing global shocks.
Rationalising the decision to retain the Monetary Policy Rate (MPR) at 27.50%, CBN cited several positive developments in the economy that are expected to support the overall moderation in prices in the near to medium term. Notably, the gap between the Nigeria Foreign Exchange Market (NFEM) and Bureau De Change (BDC) windows has narrowed, signaling improved foreign exchange market stability. This development, coupled with a positive balance of payments position indicating a favorable external sector performance, and the easing price of Premium Motor Spirit (PMS) contributing to reduced inflationary pressures, has likely influenced the Committee’s decision.
Furthermore, the moderation in food inflation, which eased to 21.26% in April 2025 from 21.79% in the previous period, suggests that the government’s efforts to increase food supply and combat insecurity in farming communities are yielding positive results. However, despite these encouraging trends, the Committee acknowledged underlying inflationary pressures driven by high electricity prices, which are contributing to increased production costs and prices. The persistent foreign exchange demand pressure is also exerting pressure on the naira and domestic prices, while legacy structural factors continue to affect the economy’s performance.
Given these factors, the MPC’s decision to retain the MPR at 27.50% reflects a cautious approach to managing the economy amidst ongoing challenges and uncertainties. The Committee’s commitment to prioritizing policies targeted at anchoring inflation expectations and easing exchange rate pressure is evident in its decision 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 measures are designed to maintain stability, ensure financial stability, and support economic growth.
The MPC’s decision also highlights the importance of sustaining the momentum in the fight against insecurity, especially in farming communities, and providing necessary inputs to farmers to further boost food production. Additionally, the Committee’s call on the fiscal authority to strengthen current efforts at enhancing foreign exchange earnings, especially from gas, oil, and non-oil exports, underscores the need for a coordinated approach to addressing the economy’s challenges. With the next meeting scheduled for July 21-22, 2025, the Committee will continue to monitor developments in both the domestic and global environments to inform its policy decisions
Overall, the CBN’s decision to retain the MPR at 27.50% is a strategic move to balance economic growth, inflation control, and financial stability amidst ongoing uncertainties. By maintaining stability and anchoring inflation expectations, the Committee aims to create a favorable environment for economic growth and development
With the next meeting scheduled for July 21-22, 2025, the Committee will continue to monitor developments in both the domestic and global environments to inform its policy decisions.
