The Central Bank of Nigeria’s Monetary
Policy Committee (MPC) has voted to retain the Monetary Policy Rate (MPR) at
27.5 percent, marking the second consecutive hold in 2025, following a series
of aggressive hikes throughout 2024.
The announcement came on Tuesday from CBN Governor
Olayemi Cardoso, who briefed journalists in Abuja after the committee’s 300th
meeting. The decision reflects what the apex bank describes as a strategic
pause to observe the trajectory of key economic indicators.
“The committee was unanimous in its decision to hold
policy and thus decided as follows: Retain the MPR at 27.50 per cent,” Cardoso
said. “The pause will enable the MPC to better understand near-term
developments in the economy.”
Macroeconomic Signals Show Improvement
Recent macroeconomic data appears to support the CBN’s decision. According to
the National Bureau of Statistics, Nigeria’s headline inflation dropped to
23.71% in April 2025, down from 24.23% in March. Month-on-month inflation fell
significantly from 3.9% to 1.86%, while food inflation eased to 21.26%, and
core inflation declined to 23.39% from 24.43%.
The MPC acknowledged these improvements, expressing
“cautious optimism” that the trend could support a more stable economic
environment.
Rates Held, Other Tools Unchanged
In addition to holding the MPR steady, the MPC retained other policy
instruments:
Cash Reserve Ratio (CRR): 50% for Deposit Money Banks,
16% for Merchant Banks
Liquidity Ratio: 30%
Asymmetric corridor: +500/-100 basis points around the
MPR
The MPC stated that these measures were necessary to
maintain stability and continue anchoring inflation expectations.
Private Sector: ‘Rate Still Too High’
Despite the positive signals, business leaders say the interest rate remains a
chokehold on economic growth.
Dele Oye, Chairman of the Organised Private Sector of
Nigeria (OPSN), expressed disappointment at the MPC’s decision.
“The economy cannot run on the 27.5 percent interest
rate,” Oye said. “Nobody can borrow money at the current rate and make a profit
from business.”
Oye, who also heads the Nigerian Association of
Chambers of Commerce, Industry, Mines and Agriculture (NACCIMA), argued that
while rate hikes may tame inflation, they simultaneously raise financing costs,
delay expansion, and weaken consumer demand.
“As borrowing becomes more expensive, businesses may
delay or scale back on investments… This can slow down business growth and
innovation,” he warned.
Mixed Reactions from MSME Advocates
Dr. Femi Egbesola, National President of the Association of Small Business
Owners of Nigeria (ASBON), commended the CBN’s decision to hold, but echoed the
call for a cut in the near term.
“The current interest rate remains too high for small
businesses to access credit and grow,” Egbesola said. “We need a more
accommodative monetary policy to stimulate production and job creation.”
Similarly, Segun Kuti-George, Vice President of the
Nigerian Association of Small Scale Industrialists (NASSI), described the move
as a watch-and-hold strategy.
“Inflation has stabilised slightly, but the decrease
is still insignificant to warrant a cut. However, it’s the right decision in
the interim,” he noted.
FX Market, Reserves and Growth Outlook
Governor Cardoso noted that the naira-dollar exchange gap has narrowed, thanks
to ongoing FX reforms. He also highlighted that Nigeria’s gross external
reserves rose to $38.90 billion as of May 16, 2025 — up 2.85% from March —
equivalent to 7.6 months of import cover.
Real GDP also showed promise, growing 3.84% in Q4
2024, up from 3.46% the previous quarter, driven by both oil and non-oil
sectors.
However, the MPC voiced concerns about declining
global crude oil prices, citing increased output from non-OPEC members and
geopolitical uncertainty, which could impact fiscal revenues and budget
performance.
Banking Sector Stability, Forward Outlook
Cardoso reassured stakeholders of the continued stability of Nigeria’s banking
system, amid ongoing recapitalisation exercises. He reiterated the CBN’s
commitment to policy measures that would dampen inflation and stabilise the
exchange rate.
The next MPC meeting is scheduled for July 21–22,
2025.
Comments:
Leave a Reply