The Central Bank of Nigeria (CBN) recently decided to maintain its benchmark interest rate, the Monetary Policy Rate (MPR), at 27.5 per cent, marking the second consecutive time in 2025. The apex bank cited several macroeconomic trends as reasons for holding the rates. DAVID AGBA reports.
At the 295th meeting of the Central Bank of Nigeria Monetary Policy Committee (MPC), held on May 20-21, 2024, the committee decided to raise the MPR by 150 basis points to 26.25 per cent from 24.75 per cent; retain the asymmetric corridor around the MPR to +100/-300 basis points; retain the Cash Reserve Ratio of Deposit Money Banks at 45.00 per cent and retain the Liquidity Ratio at 30.00 per cent.
The Committee decided at the 296th meeting of the MPC held on 22nd and 23rd July 2024, to raise the MPR by 50 basis points to 26.75 per cent from 26.25 per cent; Adjust the asymmetric corridor around the MPR to +500/-100 from +100/-300 basis points; Retain the Cash Reserve Ratio of Deposit Money Banks at 45.00 per cent and Merchant Banks at 14 per cent and Retain the Liquidity Ratio at 30.00 per cent.
Also the committee decided at the 297th meeting of the MPC held on 23rd and 24th September 2024, to: Raise the MPR by 50 basis points to 27.25 per cent from 26.75 per cent; Retain the asymmetric corridor around the MPR at +500/-100 basis points; Raise the Cash Reserve Ratio of Deposit Money Banks to 50.00 per cent from 45.00 per cent and Merchant Banks to 16 per cent from 14 per cent and Retain the Liquidity Ratio at 30.00 per cent.
The Committee decided at the 299th meeting of the MPC held on 19th and 20th February 2025, to: Retain the MPR at 27.50 per cent; Retain the asymmetric corridor around the MPR at +500/-100 basis points; Retain the Cash Reserve Ratio of Deposit Money Banks at 50.00 per cent and Merchant Banks at 16 per cent. While it retained the Liquidity Ratio at 30.00 per cent.
Right from the onset of the Ahmed Bola Tinubu’s administration, the nation’s fiscal and monetary policies have been battling with stability issues, inflationary trends as well as foreign exchange volatility among others.
These challenges have posed a heavy risk to Nigeria’s efforts towards micro and macroeconomic development with those at the helms of affairs engaging and evolving different approaches to curb the trends.
The Monetary Policy Committee of the Central Bank of Nigeria (CBN) held its 300th meeting on the 19th and 20 th of May 2025 and far-reaching decisions were taken.
The Governor of the apex bank, Olayemi Cardoso, explained that the committee’s unanimous decision to hold the rate was to allow more time for assessing recent macroeconomic trends. “The Committee was unanimous in its decision to hold policy and thus decided as follows: Retain the MPR at 27.50 per cent,” he said.
Other decisions
The CBN also retained other key parameters: the asymmetric corridor at +500/-100 basis points, the Cash Reserve Ratio (CRR) of Deposit Money Banks at 50 per cent, that of Merchant Banks at 16 per cent, and the Liquidity Ratio at 30 per cent.
The MPC attributed its decision to recent improvements in economic indicators. According to the National Bureau of Statistics (NBS), headline inflation eased to 23.71 per cent in April from 24.23 per cent in March. Month-on-month inflation dropped from 3.9 per cent to 1.86 per cent. Food inflation also decreased to 21.26 per cent from 21.79 per cent, while core inflation slowed to 23.39 per cent from 24.43 per cent.
“The MPC noted the relative improvements in some key macroeconomic indicators which are expected to support the overall moderation in prices in the near to medium term,” Cardoso said.
Govt’s efforts at improving food supply/insecurity
He acknowledged government efforts to improve food supply and address insecurity in farming communities, while warning that inflationary pressures persist due to high electricity costs, foreign exchange demand, and structural challenges.
According to him, the Committee welcomed ongoing fiscal and monetary reforms, particularly those aimed at boosting domestic production and reducing foreign exchange dependence. Cardoso stated that these efforts are key to limiting inflationary pass-through.
He said the MPC also discussed Nigeria’s external reserves, which rose by 2.85 per cent to \$38.90 billion as of May 16, up from \$37.82 billion in March. The increase represents about 7.6 months of import cover. The Committee praised the narrowing gap between official and parallel exchange rates and urged fiscal authorities to grow foreign exchange earnings, particularly from oil, gas, and non-oil exports.
Nation’s GDP growth
Cardoso also noted that Nigeria’s GDP grew by 3.84 per cent in Q4 2024, up from 3.46 per cent in the previous quarter, driven by oil and non-oil sectors, especially services.
Despite this, he warned that falling crude oil prices — influenced by rising production from non-OPEC countries and uncertainties around U.S. trade policies — could impact government revenues and implementation of the national budget.
MAN expresses worry
Meanwhile, the Manufacturers Association of Nigeria (MAN) has expressed growing alarm over the Central Bank of Nigeria’s (CBN) sustained monetary policy stance, warning that the current interest rate regime is undermining the country’s manufacturing base and economic resilience.
In a statement issued on Wednesday, 21st May 2025, MAN Director General, Segun Ajayi-Kadir, said the decision by the CBN to retain the Monetary Policy Rate (MPR) at 27.5 per cent since November 2024 is out of step with global economic trends, where many nations are reducing interest rates to support growth and industrial recovery.
“We are perturbed that when most progressive economies are charting a course toward industrial recovery and macroeconomic stability, Nigeria’s monetary stance tends to lead us in a different direction,” Ajayi-Kadir said. “Over the last quarter, countries such as members of the Euro Area, the United Kingdom, Denmark, Australia, China, India, Thailand and Egypt, have implemented interest rate cuts to bolster economic growth and support productive sectors. Yet, our rigidity continues to create unintended consequences that may deepen the parlous performance of the productive sector.”
MAN’s recommendations
However, MAN’s key recommendations to the CBN include a significant cut in the benchmark interest rate; policy incentives for commercial banks to offer single-digit, concessionary interest rates to manufacturers; the release of the ₦1 trillion Stabilization Fund to support struggling industries; an increase in the Bank of Industry’s capital base; and the settlement of the $2.4 billion in outstanding Forex Forward Contracts to restore confidence and access to essential imported inputs.
Ajayi-Kadir also urged the government to provide a stable customs duty exchange rate for industrial raw materials and machinery, in order to prevent further inflationary impacts on the sector.
“Industrial confidence is a fragile currency and once broken, it takes time to rebuild,” he said. “Nigeria cannot afford to lose its manufacturing momentum at a time when the world is repositioning for the next wave of industrial transformation.”
He warned that unless urgent measures are taken, the current monetary policy could undermine national economic resilience.
Need to maintain price stabilty
The CBN’s decision to hold rates steady signals its focus on maintaining price stability while cautiously supporting economic recovery.
By maintaining current rates, the bank is giving room for existing policies to yield results before implementing further adjustments.
According to the MPC communiqué, the committee emphasised the importance of coordinated efforts between fiscal and monetary authorities to sustain economic growth and manage inflationary pressures.
Market analysts suggest any potential rate cuts will depend on inflation trends and exchange rate stability over the coming months.
However, if inflation continues to moderate and the foreign exchange market stabilises, the CBN may consider a more accommodative policy stance in the second half of the year.
It is important to note that analysts at Cordros Research projected the MPC meeting will maintain the status quo on rates at the second meeting for this year.
Cordros, in a report, stated that since the last MPC meeting, the global economic landscape has grown increasingly volatile and uncertain, primarily driven by persistent trade protectionist policies in the US.
“In our view, the MPC is likely to take these developments into account, particularly the elevated global uncertainty and its adverse implications for naira stability, despite a positive real rate of return, given the current inflation rate.
“Against this backdrop, we expect the MPC to adopt a cautious stance, leaving the Monetary Policy Rate (MPR) unchanged, alongside retaining all other policy parameters in a bid to anchor inflation expectations and maintain the naira’s attractiveness.”
NASME’s take
The National Association of Small and Medium Enterprises (NASME) said the organised private sector is not happy with the retention of the rates, saying they expected the rates to be reduced to support the local manufacturers and the small business owners.