MPC keeps interest rate benchmark at 27.5% to sustain disinflation

Central Bank of Nigeria’s (CBN) monetary policy committee (MPC) retained the benchmark interest rate at 27.5% after the conclusion of the two-day meeting in Abuja. The committee also retained the asymmetric corridor around the policy rate at +500 bps/-100 bps. MPC also retained the cash reserves ratio (CRR) for deposit money banks at 50.0% and merchant banks at 16.0%. The liquidity rate is kept at 30.0%. The decision came after National Bureau of Statistics (NBS) released revised GDP figures, selecting 2019 as the new base year due to its relative economic stability on Monday. The rebasing led to a 34.4% upward revision of nominal GDP for 2024, now estimated at ₦372.82 trillion. This adjustment reflects expanded data coverage, particularly in services, real estate, and agriculture, while reducing the relative weight of the industrial sector. Nigeria’s economy grew by 3.13% in real terms in Q1 2025, an improvement from 2.27% in Q1 2024, though slightly below the 3.76% growth in Q4 2024. The services sector remained the dominant contributor, accounting for 57.5% of real GDP.
Central Bank Governor Olayemi Cardoso acknowledged that inflation was easing. He said the rate-setting Monetary Policy Committee’s decision was based on the need to sustain disinflation. “Maintaining the current monetary stance will continue to address the existing and emerging inflationary pressure,” Cardoso said, adding the goal was to get inflation to single digits. Most economists had predicted the central bank would keep the rate unchanged after hiking it six times in 2024 to fight soaring inflation, which repeatedly hit 28-year peaks last year. Price pressures have been spurred by President Bola Tinubu’s reforms since coming to office in 2023, including ending costly subsidies and the devaluation of the naira currency . But inflation dropped sharply in January when the statistics agency updated the base year for its calculations and re-weighted the inflation basket, falling to 24.48% in annual terms from 34.80% in December.
However, its decline has since slowed. Cardoso said the fall in inflation in June was largely driven by the moderation in energy prices and stability in the foreign exchange market. “Despite these positive developments, members (of the MPC) observed the uptick in month-on-month headline inflation, suggesting the persistence of underlying price pressures, the continued global uncertainties,” he said, adding that tariff wars and geopolitical tensions could sustain price pressures. The World Bank has warned that persistently high inflation remains a challenge for Nigeria, urging it to stick to tight monetary and disciplined fiscal policies.