CBN Keeps 27.50% Interest Rate

BY COBHAM NSA – The Monetary Policy Committee (MPC) of the Central Bank of Nigeria (CBN) on Tuesday retained the Monetary Policy Rate (MPR) at 27.50 per cent, making it the second consecutive hold-up in 2025.

The CBN Governor, Olayemi Cardoso, who announced the decision at a press briefing on Tuesday in Abuja, following the conclusion of the MPC’s 300th meeting, said, “The Committee was unanimous in its decision to hold policy and thus decided as follows: Retain the MPR at 27.50 percent.”

“All 12 members of the Committee were present, and the decision of the committee was unanimous to maintain rates at 27.5 per cent and cash reserve ratio for Deposit Money Banks at 50 per cent and 16 per cent for merchant banks. Also Liquidity Ratio of banks was maintained at 30 per cent,” he said.

According to him, the Committee’s decision was hinged on the moderation of food inflation and success in the fight against insecurity especially in farming communities, adding that the pause would enable members to better understand near-term developments in the economy.

The decision saw the CBN retaining the asymmetric corridor around the MPR at +500/-100 basis points, the Cash Reserve Ratio of Deposit Money Banks (DMBs) at 50.00 per cent, and that of Merchant Banks at 16.00 per cent, while keeping the Liquidity Ratio unchanged at 30.00 per cent.

Noting with caution recent improvements in macroeconomic indicators as captured by the National Bureau of Statistics (NBS), indicating headline inflation dropped to 23.71 per cent in April 2025 from 24.23 per cent in March, the MPC said the developments are positive and should hopefully support the overall moderation in prices in the near to medium term”.

Similarly, the NBS had indicated that on a month-on-month basis, inflation also declined significantly from 3.9 per cent to 1.86 per cent while food inflation fell to 21.26 per cent from 21.79 per cent, and core inflation dropped to 23.39 per cent in April from 24.43 per cent in March.

The CBN Governor, who also acknowledged the efforts of the government in improving food supply and tackling insecurity in farming communities, said notwithstanding these gains, there are concerns about lingering inflationary pressures driven by high electricity costs, persistent demand for foreign exchange, and structural issues within the economy.

This is as the MPC lauded reforms initiated by the Federal Government to boost local production and reduce demand for forex, stressing that such moves would help dampen inflationary pass-through in the long run.

After further reviewing developments in the foreign exchange market, the Committee urged the central bank to continue implementing reforms to boost investor confidence. They noted that Nigeria’s gross external reserves had risen by 2.85 percent to $38.90 billion as of May 16, 2025, up from $37.82 billion at the end of March. This amount represents 7.6 months of import cover.

The MPC noted the narrowing gap between official and parallel foreign exchange rates and stressed the need for fiscal authorities to boost foreign exchange earnings from oil, gas, and non-oil exports. It also reported that Nigeria’s real GDP grew by 3.84 percent in the fourth quarter of 2024, an increase from 3.46 percent in the previous quarter, driven by both oil and non-oil sectors, particularly services.

Regarding concerns about declining crude oil prices that could threaten fiscal revenues, Cardoso stated, “The Committee expressed worries about the recent drop in crude oil prices. This decline is due to increased production by non-OPEC members and uncertainties related to U.S. trade policy, which present new challenges for fiscal receipts and budget implementation.”

With the next MPC meeting slated for July 21 and 22, 2025, the MPC praised the relative stability in the banking sector, urging the apex bank to sustain effective oversight amid the ongoing recapitalisation exercise.