…Inflation slowing amid trade tensions
… Electricity tariff, FX market demand pressures are key risks
The Monetary Policy Committee (MPC) of the Central Bank of Nigeria (CBN) on Tuesday kept the benchmark interest rate steady, signaling a cautious stance as inflation showed signs of moderation in April amid global uncertainty.
In a widely anticipated decision, the MPC held its benchmark monetary policy rate (MPR) at 27.5 percent, citing the need to have a better grasp of near-term developments.
The MPC also alluded to emerging signs of macroeconomic stability and ease of inflation pressures, while urging fiscal authorities to scale up foreign exchange (FX) earnings from oil and non-oil exports.
The decision, announced by Olayemi Cardoso, CBN governor, after a two-day meeting, reflected a unanimous vote by all 12 MPC members to maintain the current policy stance amid the prevailing uncertain global economic landscape.
“Members weighed the available policy options and were unanimous in their decision to hold policy to enable a better understanding of near term developments,” Cardoso said during a post-meeting media briefing in Abuja.
According to Cardoso, the MPC members noted ‘relative improvements’ in key macroeconomic indicators, including the narrowing exchange rate gaps between the official Nigerian Foreign Exchange Market (NAFEM) and the parallel Bureau De Change (BDC) segments, a modest strengthening of the balance of payments and a sustained decline in inflation.
Headline inflation eased to 23.71 percent in April 2025, from 24.23 percent in March, while food inflation dipped to 21.26 percent. Core inflation also declined to 23.39 percent, signalling some relief from persistent price pressures.
The CBN governor credited recent fiscal and monetary coordination efforts for the disinflationary trend but cautioned that these outcomes, while encouraging, remain fragile, highlighting lingering risks such as elevated electricity tariffs, FX market demand pressures and legacy structural constraints.
With the naira stabilising after months of volatility, the MPC urged continued implementation of reforms in the FX market to bolster investor confidence.
Gross external reserves rose by 2.85 percent to $38.90 billion as of mid-May, offering 7.6 months of import cover.
However, the MPC flagged concerns about recent oil price softness due to surging supply from non-OPEC producers, posing risks to government revenue and the broader fiscal outlook.
In a call to action, the MPC urged fiscal authorities to redouble efforts to boost FX receipts.
“Particular attention must be paid to unlocking value from Nigeria’s gas, oil, and non-oil export sectors,” Cardoso stated, warning that structural delays and trade-related uncertainties may otherwise undermine gains.
Beyond the MPR, the CBN retained its tight policy framework. The asymmetric corridor around the MPR was held at +500/-100 basis points, and the Cash Reserve Ratio (CRR) for commercial banks stayed at 50 percent, with the liquidity ratio remaining unchanged at 30 percent.
The MPC reaffirmed confidence in the resilience of the banking sector, noting continued improvement in key performance metrics.
Cardoso emphasised that the ongoing recapitalisation drive is progressing as planned, with the central bank maintaining strict oversight.
On the growth front, real GDP expanded by 3.84 percent in the fourth quarter (Q4) 2024, up from 3.46 percent in the prior quarter, driven by both oil and non-oil sectors, with services accounting for the lion’s share of the expansion.
Read also: Nigeria’s stocks see mild gain on MPC ‘hold’ decisions
Global uncertainty
Yet global uncertainty casts a shadow on these strides, especially as the International Monetary Fund (IMF) recently revised down its 2025 global growth forecast to 2.8 percent from 3.3 percent in 2024, amid tightening financial conditions and geopolitical tensions.
United States’ President Donald Trump recently stirred the global markets after imposing punishing tariffs with trade partners.
It imposed 145 percent levies on Chinese goods, with China retaliating with a 125 percent tariff on US products. He has however cut Chinese tariffs to 30 percent, forcing China to reduce its levies on US goods to 10 percent.
Similarly, wars between Israel and Palestine, Russia and Ukraine and recently India and Pakistan have raised global tensions.
Against this backdrop, the MPC pledged to keep ‘close surveillance’ on both domestic and global developments and reiterated its commitment to policies that anchor inflation expectations and ease pressure on the exchange rate.
Cardoso noted CBN’s current decisions as critical to consolidating price stability and sustaining investor confidence, signalling the apex bank’s continued cautious approach in navigating Nigeria’s complex macroeconomic terrain.
Read also: MPC holds benchmark interest rate as inflation slows
Rate hold in line with expectations
BusinessDay had reported analysts’ expectations on Monday, with almost everyone predicting a rate hold.
Reacting to the MPC’s decision on Tuesday, Ayodeji Ebo, managing director and chief business officer at Optimus by Afrinvest, described it as expected.
“It’s in line with expectations, hence we don’t expect any major change to the economic variables,” he said.
Ebo emphasised the need for the government to improve FX revenue, particularly from non-oil exports and gas.
“The stability of the FX is positive to both foreign and domestic investors. Overall, the fiscal authorities need to come up with more deliberate strategies to support small and medium scale enterprises,” he added.
Razia Khan, managing director and chief economist for Africa and the Middle East at Standard Chartered Bank, said the MPC’s decision to hold all rates was widely anticipated.
“Largely as expected, the CBN kept all interest rates on hold, although expressing the hope that inflation would decelerate in the coming months, helped by government efforts to provide inputs to farmers to boost agricultural productivity,” she said.
Khan attributed recent naira stability to the reforms already undertaken by the CBN, noting that the commitment to orthodox monetary policy was restated. She added,
“Adjusting to lower oil prices is seen as a task for the fiscal authorities, although the CBN will extend efforts to attract diaspora flows. In all, little forward guidance was provided, but the CBN notably expressed a quiet confidence that it was doing the right thing. The naira stability is testament to this.”
Tilewa Adebajo, CEO of CFG Advisory, also weighed in on the decision. “Given the stability within the system and the inflationary uncertainties, the move is expected,” he said.
At its previous meeting in February 2025, the MPC similarly maintained the interest rate at 27.5 percent following the rebasing of the Consumer Price Index (CPI). That decision marked a return to a real rate environment and laid the groundwork for the cautious stance the MPC has continued to adopt.
