CBN Holds Interest Rate at 27.5% for Stability, But Nigerians Still Grapple with Rising Living Costs

In a move that signals a continued fight against inflation, the Central Bank of Nigeria (CBN) has again held the Monetary Policy Rate (MPR) at 27.5%, following its 301st Monetary Policy Committee (MPC) meeting held on July 21 and 22, 2025. While the decision may reassure global investors and economists, for the average Nigerian, the impact remains a mix of restrained optimism and daily hardship.

Inside the committee room, twelve economic minds unanimously agreed to maintain all key policy parameters, reaffirming the tight stance adopted earlier in the year. It’s a strategy aimed at sustaining the slow but steady disinflation seen in recent months.

But outside the walls of the CBN’s Abuja headquarters, everyday Nigerians like Blessing Adeyemi, a single mother of three in Ojota, Lagos, continue to wrestle with soaring prices of basic food items.

“They say inflation is coming down, but I still pay more for rice, bread, and even cooking gas than I did three months ago,” she says with frustration. “How is this helping me?”

What the MPC Decided:

At the heart of the decision was the CBN’s mission to consolidate recent economic gains. The Committee resolved to:

• Retain the MPR at 27.50%,
• Maintain the asymmetric corridor at +500/-100 basis points,
• Keep the Cash Reserve Ratio (CRR) at 50% for commercial banks and 16% for merchant banks,
• Maintain the Liquidity Ratio at 30%.

These decisions, while technical, are geared toward anchoring inflation expectations and discouraging excessive liquidity that might fuel further price hikes.

The Economic Picture: Progress with Caveats

The MPC acknowledged that headline inflation declined to 22.22% in June 2025—the third consecutive month of disinflation—largely due to falling energy prices, including cooking gas, wood charcoal, and diesel. However, month-on-month inflation rose slightly to 1.68% from 1.53%, underlining persistent pressures in sectors such as services and imported food.

Despite the statistics, food inflation actually increased to 21.97%, largely due to rising costs of processed foods. Core inflation (excluding energy and farm produce) also edged higher, pointing to increasing costs in housing, ICT services, and personal care.

For vendors like Musa Lawal, a barrow-pusher turned pepper seller at Mile 12 Market, it’s hard to reconcile these figures with daily realities.

“Diesel has come down, yes. But transportation costs are still high, and I can’t afford to store fresh goods. Every little thing affects our prices.”

Cautious Optimism from the Apex Bank

CBN Governor Olayemi Cardoso emphasized that the decision to hold rates was strategic.

“We remain focused on bringing inflation down while safeguarding financial stability. Our aim is to protect purchasing power in the long term,” he said.

That long-term focus appears to be paying off in some areas. The banking sector remains stable, buoyed by a recapitalization program. Eight banks have reportedly met the recapitalization requirement, with others progressing steadily.

The foreign exchange market has also stabilized, with stronger capital inflows and growing non-oil exports helping to shore up external reserves, which stood at $40.11 billion as of July 18—covering about 9.5 months of imports.

GDP Growth and Economic Signals

Nigeria’s economy grew by 3.13% in Q1 2025, outpacing the 2.27% posted in the same period last year. According to the Purchasing Managers Index, business activity continues to expand.

Yet in the bustling streets of Kano, Port Harcourt, and Onitsha, many small-scale traders say they have not felt the impact of this growth.

“The economy may be expanding on paper, but our profit margins are shrinking,” says Uche Mba, who runs a small electronics shop in Aba. “High borrowing rates are killing our businesses.”

The Road Ahead

With the harvest season approaching, the MPC expects food prices to ease. Combined with lower petrol (PMS) prices and a stable exchange rate, inflation may decline further in the months ahead.

But for this to translate into real relief, the Committee also called on the Federal Government to intensify agricultural support, especially in securing farming regions and distributing inputs like fertilizers and seedlings.

Governor Cardoso ended on a hopeful note, reiterating the CBN’s resolve to pursue price stability and build economic resilience.

The next MPC meeting is scheduled for September 22–23, 2025.

While policymakers at the apex bank crunch data and calibrate monetary levers, the real test of economic recovery lies on the faces of Nigerians across markets, homes, and roads—people trying to stretch every naira to feed their families, fuel their cars, and keep their businesses afloat. For them, every percentage point of inflation is not just a figure—it’s a lived reality.

As the CBN walks the tightrope of controlling inflation and sustaining growth, the challenge will be to ensure that macroeconomic stability eventually delivers microeconomic relief. Until then, Nigerians continue to hope—for lower prices, cheaper credit, and a tomorrow that finally feels better than today.

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