The Central Bank of Nigeria’s (CBN) Monetary Policy Committee (MPC) has voted to hold all key rates steady, keeping the Monetary Policy Rate (MPR) at 27.5% as it monitors inflation and exchange rate dynamics.
This was announced by the CBN Governor, Yemi Cardoso, at the post-MPC press briefing on Thursday.
The decision reflects the committee’s cautious approach to monetary policy, as it continues to evaluate macroeconomic conditions before making any adjustments.
The decision to hold rates comes at a time when interest rates on treasury bills have trended downwards to 19%, with short-term and long-term yields converging, resulting in a flat yield curve.
This signals expectations that monetary conditions may remain tight in the short run.
Key decisions made by the MPC:
- MPR: Held at 27.50%, reflecting the committee’s conservative stance
- Asymmetric corridor: Retained at +500/-100 basis points around the MPR.
- Cash Reserve Ratio (CRR): Maintained at 50.00% for Deposit Money Banks and 16% for Merchant Banks.
- Liquidity Ratio: Unchanged at 30.00%.
The MPC voted unanimously to keep rates steady, with Governor Cardoso stating that while inflation showed early signs of easing, it was “too early to start considering rate cuts.”
Why the CBN choose to hold rates
According to the MPC communique, the decision to maintain rates was driven by “recent macroeconomic indicators that suggest improved market stability”, particularly in the foreign exchange market and inflation trends.
- Governor Cardoso emphasized that while the exchange rate has begun to appreciate due to recent monetary interventions, the committee remains cautious about inflationary risks, particularly food inflation.
- “The Committee noted that core inflation remains a concern, even as recent data indicates a slowing trajectory. Food prices continue to exert upward pressure, and thus, premature monetary easing could reverse recent gains,” the communique stated.
The MPC also acknowledged the impact of the rebased Consumer Price Index (CPI) by the National Bureau of Statistics (NBS), which adjusted item weights to reflect current consumption patterns.
- The communique highlighted that “improved security measures in agricultural regions, coupled with policy actions to enhance food supply, should support the continued moderation of inflation in the coming months.”
- Additionally, the committee expressed confidence that CBN-led foreign exchange market reforms, including the introduction of the B-Match system and Nigeria Foreign Exchange Code, would enhance market stability, transparency, and investor confidence.
- Despite the CBN’s cautious stance, manufacturers and business leaders have called for an interest rate cut, as lending rates have soared to as high as 39%, making it difficult for businesses to access credit and finance expansion.
Many argue that high borrowing costs are stifling industrial growth and limiting economic expansion. However, the CBN remains firm in its approach, focusing on price stability and ensuring inflation continues its downward trend before any policy shift.
Monetary policy trends across Sub-Saharan Africa
Nigeria is not alone in maintaining a cautious monetary stance. Across Sub-Saharan Africa, several central banks have opted to hold or adjust rates, weighing inflation concerns against economic stability:
South Africa: The South African Reserve Bank (SARB) cut its repo rate by 25 basis points to 7.50% in January 2025. This marked the third consecutive rate cut as the bank sought to support economic growth amid global trade uncertainties. However, the SARB warned that inflation risks remain, necessitating a cautious approach to future rate adjustments.
Ghana: The Bank of Ghana (BoG) maintained its policy rate at 27.00%, citing a stable global growth outlook and domestic economic resilience. However, underlying inflationary pressures, particularly from the services sector and a tight labor market, continue to pose challenges.
Kenya: The Central Bank of Kenya (CBK) cut its benchmark rate by 50 basis points to 10.75% in February 2025. The decision was aimed at stimulating lending and supporting economic growth, as the country recorded a slowdown in GDP growth from 5.6% in 2023 to 4.6% in 2024.
What this means for Nigeria’s economy
The CBN’s decision to hold rates steady underscores its priority of maintaining price stability while supporting economic recovery.
- By keeping rates unchanged, the central bank aims to give ongoing policy measures more time to take full effect before considering any adjustments.
- According to the communique, the committee “reiterated the importance of coordination between fiscal and monetary authorities to sustain economic growth while addressing inflationary risks.”
- Market analysts suggest that any potential rate cuts will depend on how inflation trends evolve in the next few months.
If inflation continues to moderate and exchange rate stability improves, the CBN could begin considering a more accommodative monetary policy stance in the second half of the year.
When could rates start coming down?
The MPC has signaled that it will “remain data-dependent and continue to assess economic conditions before adjusting rates.”
- While inflation is showing early signs of slowing, the committee remains cautious about external shocks, food supply constraints, and exchange rate movements.
- For now, interest rates remain elevated, but stability remains the focus—a stance that aligns with broader trends in Sub-Saharan Africa, where central banks are treading carefully to avoid policy missteps.
The next MPC meeting will be closely watched to see whether further inflation declines and exchange rate improvements could open the door for a policy shift.
