CBN Keeps Interest Rate at 27.5% to Tame Inflation, Stabilize Forex

The Central Bank of Nigeria (CBN) has retained the Monetary Policy Rate (MPR) at 27.5 per cent following the conclusion of its 300th Monetary Policy Committee (MPC) meeting, held on May 19 and 20, 2025. The decision was unanimously agreed upon by all twelve committee members as the apex bank continues efforts to stabilize the economy amid inflationary pressures and structural challenges.

CBN Governor, Mr. Olayemi Cardoso, who announced the outcome of the meeting on Tuesday, said the committee opted to maintain its current stance to allow time for previous reforms to take effect.

“The MPC resolved to hold all policy parameters constant, considering the relative improvements in macroeconomic indicators and the need to sustain the ongoing disinflation trend,” Cardoso said.

Key Policy Retentions:

• Monetary Policy Rate (MPR): 27.5%
• Asymmetric corridor: +500/-100 basis points
• Cash Reserve Ratio (CRR): 50% for Deposit Money Banks; 16% for Merchant Banks
• Liquidity Ratio: 30%

Encouraging Macroeconomic Signs

The Committee noted notable improvements in several economic indicators. These include the narrowing gap between the official and parallel foreign exchange markets, a surplus in the balance of payments, and declining pump prices of Premium Motor Spirit (PMS).

Significantly, food inflation—which has long pressured household spending—showed signs of easing. The MPC commended the Federal Government’s ongoing efforts to boost food supply and improve security in farming communities, describing these steps as critical to stabilizing prices.

Structural Headwinds Persist

Despite the encouraging trends, the committee flagged continued inflationary threats stemming from high electricity tariffs, strong forex demand, and deep-rooted structural issues.

Cardoso noted that recent federal policies aimed at stimulating local production and curbing foreign currency dependence are expected to help reduce cost pressures in the medium term.

Forex Reforms and Fiscal Caution

With the naira showing signs of relative stability, the MPC urged the CBN to maintain its ongoing foreign exchange reforms to further strengthen investor and public confidence.

The committee also called on fiscal authorities to intensify efforts in boosting foreign exchange earnings, particularly through increased oil, gas, and non-oil exports. However, it expressed concern about falling global crude oil prices, attributed to rising non-OPEC supply and ongoing geopolitical uncertainties, warning that such trends could complicate fiscal projections and budget execution.

Banking Sector Soundness

On the banking front, the MPC reaffirmed confidence in the system’s stability. It praised progress in the ongoing recapitalization of banks and improvements in key performance indicators, urging continued regulatory vigilance by the apex bank.

Inflation, Growth and Reserves

Data from the National Bureau of Statistics (NBS) showed headline inflation eased to 23.71% in April 2025 from 24.23% in March. Month-on-month inflation also dropped to 1.86% from 3.9%. Food inflation declined to 21.26%, while core inflation fell to 23.39%.

Nigeria’s Gross Domestic Product (GDP) expanded by 3.84% in Q4 2024, up from 3.46% in the previous quarter, driven by gains in both oil and non-oil sectors—particularly services.

The nation’s external reserves rose to $38.90 billion by mid-May, representing 7.6 months of import cover. However, the balance of payments surplus fell to $1.10 billion in Q4 2024 from $4.21 billion the previous quarter, due to a narrowing current account surplus.

Global Economic Outlook

The International Monetary Fund (IMF) has revised its global growth forecast downward to 2.8% for 2025 and 3.0% for 2026, from 3.3% in 2024, citing persistent uncertainty in global trade and monetary policy environments.

The MPC pledged to closely monitor both domestic and global trends and promised appropriate responses to emerging shocks.

Looking Ahead

The Committee emphasized its commitment to curbing inflation and ensuring exchange rate stability, adding that its current position offers room to evaluate unfolding economic dynamics.

The next MPC meeting is scheduled for July 21–22, 2025.

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