CBN Maintains 27.5% Interest Rate, Holds Key Monetary Policy Parameters
The Central Bank of Nigeria (CBN) has decided to retain the country’s benchmark interest rate at 27.5%, along with all other key monetary policy parameters. The decision was made during the 299th Monetary Policy Committee (MPC) meeting held in Abuja.
Announcing the decision at a press briefing on Thursday, CBN Governor Olayemi Cardoso stated that the committee reached a unanimous decision to maintain all monetary policy tools as it assessed Nigeria’s economic outlook for 2025.
Key Monetary Policy Decisions
The MPC resolved to:
✅ Retain the Monetary Policy Rate (MPR) at 27.5%
✅ Maintain the asymmetric corridor around the MPR at +500/-100 basis points
✅ Keep the Cash Reserve Ratio (CRR) at 50% for Deposit Money Banks and 16% for Merchant Banks
✅ Retain the Liquidity Ratio at 30%
This decision comes after six consecutive rate hikes in 2024 as the apex bank tackled inflationary pressures, exchange rate volatility, and economic growth concerns.
Economic Rationale Behind the Decision
The MPC highlighted stability in the foreign exchange market, an improvement in external reserves, and a gradual moderation in fuel prices as factors influencing its decision.
However, inflation remains a concern, especially following the recent rebasing of the Consumer Price Index (CPI) by the National Bureau of Statistics (NBS). The new inflation figure for January 2025 stands at 24.48%, compared to 34.80% in December 2024 under the previous base year.
The committee expressed confidence that as food security measures improve, inflationary pressures—especially those driven by rising food prices—will ease over time.
Foreign Exchange and Economic Growth Prospects
Cardoso emphasized that recent CBN interventions in the foreign exchange market, such as the Electronic Foreign Exchange Matching System and the Nigeria Foreign Exchange Code, have helped stabilize the naira.
The MPC also noted a convergence between official exchange rates and Bureau de Change (BDC) rates, leading to improved market transparency and liquidity.
On the external front, the committee acknowledged an increase in oil production, which rose to 1.54 million barrels per day (bpd) in January 2025. This contributed to Nigeria’s external reserves, which stood at $39.4 billion as of February 14, 2025, providing an import cover of 9.6 months.
Meanwhile, Nigeria’s GDP grew by 3.46% in Q3 2024, primarily driven by the non-oil sector, with services leading the charge.
Banking Sector and Geopolitical Risks
Despite macroeconomic challenges, Cardoso reassured that Nigeria’s banking sector remains strong and resilient. However, he stressed the need for strengthened banking system surveillance, particularly in light of ongoing recapitalization efforts for deposit money banks.
The committee also identified geopolitical risks, including:
- The Russia-Ukraine conflict
- Tensions in the Middle East
- The U.S. government’s increased tariffs on trade partners, which could impact global inflation and economic growth
Calls for Policy Adjustment
The decision to maintain the current monetary parameters follows calls from economic analysts and business groups urging the CBN to pause further rate hikes.
The Centre for the Promotion of Private Enterprise (CPPE) previously argued that fiscal policy interventions should take priority in addressing inflationary pressures.
CPPE CEO, Dr. Muda Yusuf, warned that further interest rate increases could stifle economic growth at a time when businesses need affordable credit.
Next Steps
The CBN’s next MPC meeting is scheduled for May 19-20, 2025. The committee reaffirmed its commitment to monitoring both domestic and global economic trends to ensure stability in the financial system.
