At its 300th Monetary Policy Committee (MPC) meeting on May 20, 2025, the Central Bank of Nigeria (CBN) chose to maintain the Monetary Policy Rate (MPR) at 27.5%. This decision comes as the bank takes a cautious stance in managing inflation, despite signs of gradual improvement in key economic indicators.
Highlights of the Monetary Policy Decision:
- Monetary Policy Rate (MPR): Left unchanged at 27.5%
- Cash Reserve Ratio (CRR): Retained at 50% for commercial banks, 16% for merchant banks
- Liquidity Ratio: Maintained at 30%
- Asymmetric Corridor: Stays at +500/-100 basis points around the MPR
This marks the second consecutive MPC meeting in 2025 where the CBN has held the interest rate steady, following aggressive rate hikes in 2024 intended to tackle high inflation.
Reasoning Behind the Policy Stance
CBN Governor Olayemi Cardoso explained that while inflation remains elevated, there have been encouraging signs in the economy, including:
- A narrower gap between the official and black market exchange rates
- A better-than-expected balance of payments
- Stabilizing fuel prices
- A decline in the rate of food price increases
However, the MPC also acknowledged persistent inflationary pressures caused by rising electricity prices, consistent demand for foreign exchange, and deeper structural issues within the economy.
“The committee agreed that holding the rate gives room for sustained progress in curbing inflation, while also supporting stability in the financial system,” Cardoso said.
Looking Ahead: Policy Focus and Expectations
The CBN reaffirmed its resolve to:
- Continue with a tight monetary policy approach to contain inflation
- Align monetary strategy with ongoing fiscal reforms
- Encourage more foreign exchange earnings from oil and non-oil exports
- Build investor confidence through consistency in policy direction
The Bank also urged government institutions to address infrastructure gaps, improve power supply, and tackle insecurity, as these factors significantly impact inflation and production costs.
What This Means for Households and Businesses
For consumers, the decision is aimed at preventing further price surges and stabilizing the naira. However, high borrowing rates could still pose challenges for businesses and individuals seeking credit, especially small and medium enterprises.
The next Monetary Policy Committee meeting is scheduled for July 21–22, 2025.
