UPDATED: CBN Maintains Interest Rate at 27.5%
The Monetary Policy Committee (MPC) of the Central Bank of Nigeria (CBN) has retained the benchmark interest rate at 27.50% following its 299th meeting in Abuja.
CBN Governor Olayemi Cardoso announced the decision during a press briefing on Thursday, stating that all key monetary parameters remain unchanged as the committee evaluates the economic outlook for 2025.
MPC’s Key Decisions:
- Monetary Policy Rate (MPR): Retained at 27.50%
- Asymmetric Corridor: Maintained at +500/-100 basis points
- Cash Reserve Ratio: Kept at 50.00% for deposit money banks and 16.00% for merchant banks
- Liquidity Ratio: Held steady at 30.00%
Why the MPC Paused Rate Hikes
After six consecutive rate hikes in 2024, the decision to hold rates reflects the CBN’s cautious approach in balancing inflationary pressures, exchange rate stability, and economic growth.
The committee highlighted:
- Stability in the foreign exchange market
- Improved external reserves
- Gradual moderation in fuel prices
Despite this, inflation remains a concern. The rebased Consumer Price Index (CPI) from the National Bureau of Statistics revised headline inflation to 24.48% in January 2025, down from 34.80% in December 2024 under the previous methodology.
The MPC expressed confidence that with improved food security, inflationary pressures—especially those driven by food prices—will decline over time.
CBN’s Efforts in Stabilizing the Economy
Cardoso emphasized the need for continued monetary and fiscal policy coordination to sustain macroeconomic gains. He pointed to the Electronic Foreign Exchange Matching System and the Nigeria Foreign Exchange Code as crucial initiatives that have helped stabilize the exchange rate.
The committee also noted:
- A convergence between the Nigeria Foreign Exchange Market and Bureau de Change rates, improving market liquidity and transparency.
- Oil production reached 1.54 million barrels per day in January 2025, supporting external reserves, which stood at $39.4 billion as of February 14, 2025, providing an import cover of 9.6 months.
- Nigeria’s GDP grew by 3.46% in Q3 2024, driven by the non-oil sector, particularly the services industry.
Banking Sector Resilience & Risks
Cardoso reassured that Nigeria’s banking sector remains strong, but stressed the importance of enhanced surveillance, especially amid the ongoing recapitalization of deposit money banks. The CBN aims to ensure quality capital injection to safeguard financial stability amid domestic and global uncertainties.
The committee also identified geopolitical risks—including the Russia-Ukraine war and tensions in the Middle East—as potential threats to Nigeria’s economic stability. Additionally, the United States’ trade tariffs on global partners could impact inflation and economic growth worldwide.
Calls to Halt Rate Hikes Grow Louder
With inflation appearing to moderate under the rebased CPI, economic analysts and business groups have urged the CBN to pause further rate increases.
The Centre for the Promotion of Private Enterprise (CPPE) previously called for an end to monetary tightening, arguing that fiscal policy interventions should now take priority in tackling inflation.
Dr. Muda Yusuf, CEO of CPPE, warned that raising interest rates further could slow economic growth, particularly at a time when businesses need affordable credit to expand and operate.
What’s Next?
The MPC reaffirmed its commitment to closely monitor both domestic and global economic trends, with the next policy meeting scheduled for May 19–20, 2025.
