The Monetary Policy Committee (MPC) of the Central Bank of Nigeria (CBN) has opted to maintain its benchmark interest rate, the Monetary Policy Rate (MPR), at 27.5 per cent. The decision, announced by CBN Governor Olayemi Cardoso following the committee’s 301st meeting in Abuja, marks the third consecutive time the regulator has held the rate steady in 2025, reflecting a cautious approach to monetary policy despite a headline disinflationary trend.
The MPR, which serves as the foundational interest rate for the Nigerian economy, was last adjusted in February. In its latest stance, the committee also retained the Cash Reserve Ratio (CRR) for commercial banks at 50 per cent and the Liquidity Ratio at 30 per cent. The asymmetric corridor around the MPR was adjusted to +500 and -100 basis points, indicating a continued tight monetary policy posture aimed at absorbing excess liquidity from the financial system and anchoring inflationary expectations.
Governor Cardoso explained the MPC’s rationale, stating that the decision was taken to sustain the momentum of disinflation and sufficiently contain price pressure. He affirmed the committee’s dedication to a rigorous assessment of economic conditions, price developments and outlook to inform future policy decisions.
The decision comes against a backdrop of moderating headline inflation, which declined to 22.22 per cent in June 2025, down from 22.97 per cent in May. This marks the third consecutive month of deceleration, a positive development attributed by the CBN governor to the moderation in energy prices and stability in the foreign exchange market. However, Cardoso sounded a note of caution, highlighting that despite these encouraging trends, a month-on-month uptick in headline inflation suggests “the persistence of underlying price pressures.
Global economic uncertainties continue to cast a shadow over Nigeria’s inflation outlook. Governor Cardoso specifically cited continued global uncertainties associated with the tariff wars and geopolitical tensions, warning that these could further exacerbate supply chain disruption and exert pressure on the prices of imported items.Such external vulnerabilities underscore the challenges of managing domestic inflation, particularly for an import-dependent economy like Nigeria.
Despite the inflation challenges, the banking system has demonstrated resilience. The CBN governor noted continued stability in the banking system, evidenced by the stable financial soundness indicators” a robustness that is expected to be further strengthened by the ongoing banking recapitalisation exercise. This stability provides a crucial bedrock for the transmission of monetary policy and overall economic confidence.
A major positive development highlighted by the CBN was the sustained stability in the foreign exchange market. This stability has been underpinned by a confluence of factors, including increased capital inflows, improved crude oil production, a rise in non-oil exports, and a reduction in imports. These dynamics have contributed to a notable strengthening of Nigeria’s external reserves. Cardoso reported that gross external reserves had risen to $40.11 billion as of July 18, providing approximately 9.5 months of import cover.
Looking ahead, CBN staff projections indicate a continued decline in inflation in the coming months. This optimistic outlook is predicated on several factors including the sustained tight monetary policy stance, the anticipated stability of the exchange rate, a projected decline in Premium Motor Spirit (PMS) prices, and the onset of the harvest season, which typically alleviates food price pressures.
However, the central bank remains cautious. “Given the persistent uncertainty in the policy environment and underlying price pressures, monetary policy will need to maintain its current stance until risks to inflation recede sufficiently,” Governor Cardoso reiterated.
Analysts at Cordros Research noted that the committee’s decision to maintain the policy rate came in contrast to their expectation of a shift toward monetary easing. “We had earlier expected the MPC to lower the MPR by 50bps to 27.00% given the sustained moderation in headline inflation, reduced global pressures, and relative naira stability,” Cordros stated.
However, they acknowledged that the MPC’s stance was largely influenced by persistent inflationary pressures, particularly the uptick in food and core inflation in June, despite continued moderation in headline inflation, as well as existing global uncertainties. These underlying pressures, according to Cordros, prompted the MPC to hold the policy rate steady as part of efforts to contain inflation and reinforce the ongoing disinflationary trend.
Looking ahead, Cordros Research anticipates further moderation in inflation, supported by the current monetary policy stance, relative exchange rate stability, easing petrol prices, and the expected impact of the main harvest season in Q4-25 on food inflation. Nonetheless, they believe the pace and consistency of disinflation will remain the key determinant of future policy decisions. Should headline inflation and key CPI sub-components remain volatile without a clear and sustained downward trend, Cordros suggests the MPC is likely to keep the MPR unchanged in the near term.
Additionally, while global market volatility has eased, persistent trade tensions continue to weigh on the global economic outlook, contributing to a more cautious approach to monetary policy easing across advanced and emerging economies. This, Cordros added, may further support the MPC’s decision to maintain elevated interest rates to sustain carry trade opportunities.
The MPC’s commitment to the bank’s price stability mandate was reaffirmed, with a promise to take appropriate measures to foster stability and confidence in the economy. The next MPC meeting is scheduled for September 22 and September 23, where the committee will once again assess the evolving economic situation and determine the future trajectory of monetary policy.
