From Adanna Nnamani, Abuja
In its symbolic 300th sitting, the Monetary Policy Committee (MPC) of the Central Bank of Nigeria (CBN) made a critical decision. It chose to hold its ground rather than chart a new course in monetary policy.
The decision to retain the benchmark Monetary Policy Rate (MPR) at 27.5 percent, alongside other key monetary parameters, highlighted a strategic pause at a time when Nigeria’s economic narrative is delicately balanced between cautious optimism and lurking vulnerabilities.
Meeting over two days, May 19 and 20, 2025, all 12 MPC members agreed it was not the time for abrupt adjustments. Instead, the Committee opted for stability, affirming its focus on inflation control, exchange rate management and financial sector oversight while acknowledging recent gains in macroeconomic fundamentals.
Why hold?
At the heart of the Committee’s decision was an improving, but still fragile, macroeconomic environment. April’s headline inflation rate dipped to 23.71 percent, a decline from 24.23 percent in March, according to data from the National Bureau of Statistics. Encouragingly, food inflation fell to 21.26 percent from 21.79 percent, signaling relief for millions of Nigerians grappling with skyrocketing food prices. Core inflation, which strips out volatile items like food and energy, also moderated to 23.39 percent.
For the CBN, these figures suggest the policy tightening measures deployed over recent quarters are beginning to work. By maintaining the MPR at 27.5 percent, the highest in over a decade, the apex bank aims to consolidate these gains without triggering unintended economic consequences.
“The Committee 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,” the post-meeting communiqué read.
FX stability and BOP surplus
Nigeria’s exchange rate volatility has long complicated monetary policy decisions. However, recent developments indicate a narrowing gap between the Nigeria Foreign Exchange Market (NFEM) and the Bureau De Change (BDC) windows. This progress, coupled with a modest buildup in external reserves, up 2.85 percent to $38.90 billion as of mid-May, and a positive balance of payments (BoP) position, gave the Committee further reason to stay the course. The fourth quarter of 2024 saw a BoP surplus of $1.10 billion, though it was notably lower than the $4.21 billion recorded in Q3. Still, in a nation dependent on oil and remittance inflows, the ability to maintain an import cover of 7.6 months offers policymakers a measure of confidence.
The MPC acknowledged the Federal Government’s policy initiatives to reduce FX demand, especially through support for local production. Members encouraged a continuation of these reforms and called on fiscal authorities to double down on foreign exchange earnings from oil, gas, and non-oil exports.
Food, fuel and farmers
While inflation is easing, the Committee recognised that pressures remain, particularly from structural sources. High electricity tariffs, persistent FX demand, and legacy inefficiencies continue to exert upward pressure on prices. Nevertheless, there was praise for the Federal Government’s intervention in the agricultural sector. The Committee lauded measures to enhance food supply and tackle insecurity in farming communities, acknowledging that food inflation is largely shaped by availability and logistics.
The MPC urged the government to sustain support for security operations and provide critical inputs to farmers. With agriculture still the backbone of Nigeria’s informal economy, safeguarding rural productivity is pivotal not only to food security but also to economic inclusion and job creation.
Global tides and local anchors
Beyond Nigeria’s borders, the Committee kept an eye on shifting global winds. The International Monetary Fund (IMF) recently revised its global growth projection downward to 2.8 percent in 2025 and 3.0 percent in 2026—down from 3.3 percent in 2024—citing an “uncertain policy environment.”
Compounding matters is the softening of global crude oil prices. With Nigeria’s budget deeply reliant on oil revenue, the MPC flagged concerns over reduced fiscal receipts—linked in part to increased production from non-OPEC members and geopolitical uncertainties surrounding U.S. trade policy.
These global dynamics feed directly into Nigeria’s budgetary framework and foreign reserve buffers. The Committee, therefore, reaffirmed the need for close coordination between monetary and fiscal authorities to weather looming external shocks.
Banking sector resilience and recapitalisation
The MPC’s 300th meeting was not only a moment of reflection, it also served as an inflection point for Nigeria’s banking industry. The Committee expressed satisfaction with the ongoing recapitalisation exercise, which aims to enhance the resilience and capacity of Nigerian banks to support economic growth.
According to the Committee, key performance indicators within the banking system remain strong, signaling systemic stability. Nonetheless, members emphasized the need for continued oversight and compliance with macroprudential regulations.
Given the ambitious goals outlined in the CBN’s financial inclusion and credit expansion agenda, a well-capitalised, stable banking sector remains a critical lever for policy transmission.
The verdict
For many observers, the MPC’s decision to hold all major policy levers steady may appear anticlimactic. But behind the numbers lies a deliberate strategy: to maintain macroeconomic discipline while observing how evolving trends play out in the months ahead.
Specifically, the Committee voted to: Retain the Monetary Policy Rate (MPR) at 27.5 percent; maintain the asymmetric corridor around the MPR at +500/-100 basis points; keep the Cash Reserve Ratio (CRR) of Deposit Money Banks at 50 percent and Merchant Banks at 16 percent and preserve the Liquidity Ratio at 30 percent. In monetary policy, inaction can sometimes be more powerful than change. Holding the line reflects a calculated wait-and-see approach, one that seeks to anchor inflation expectations, safeguard financial system stability, and build investor confidence.
What lies ahead
The next MPC meeting is scheduled for July 21–22, 2025, and will once again provide a platform for recalibrating Nigeria’s monetary policy stance.
Until then, much depends on how the broader economy responds to existing measures. Will inflation continue its downward trend? Will external reserves hold firm in the face of volatile crude prices? Can FX stability be sustained without administrative interventions?
What remains clear is that the CBN, under the leadership of Governor Olayemi Cardoso, is navigating a complex landscape with a steady hand and a cautious eye. The 300th MPC meeting may have passed quietly, but its decisions speak volumes: in uncertain times, consistency can be a powerful policy in itself.
As Nigerians contend with inflation, global shocks and structural constraints, they will be watching closely, not just for what changes, but for what endures.