SAMI TUNJI explores the Central Bank of Nigeria’s recent monetary policy as it relates to stabilisation of the naira and curbing of inflation
The Central Bank of Nigeria and its Monetary Policy Committee have taken decisive steps to stabilise the naira and curb inflation, signalling a shift in the country’s macroeconomic landscape.
At the 299th MPC meeting held on February 19 and 20, 2025, the Committee opted to maintain the Monetary Policy Rate at 27.5 per cent, a move that underlines its commitment to balancing inflation control with exchange rate stability.
CBN Governor, Olayemi Cardoso, announced the decision during a press briefing last week, saying, “The committee was unanimous in its decision to hold all parameters and thus decided as follows: “1. Retain the MPR at 27.50 per cent. 2. Retain the asymmetric corridor around the MPR at +500/-100 basis points. 3. Retain the Cash Reserve Ratio of Deposit Money Banks at 50.00 per cent and Merchant Banks at 16 per cent. 4. Retain the liquidity ratio at 30.00 per cent,” Cardoso said.
Essence of CBN’s decision on naira stability, inflation
28th February 2025
SAMI TUNJI explores the Central Bank of Nigeria’s recent monetary policy as it relates to stabilisation of the naira and curbing of inflation
The Central Bank of Nigeria and its Monetary Policy Committee have taken decisive steps to stabilise the naira and curb inflation, signalling a shift in the country’s macroeconomic landscape.
At the 299th MPC meeting held on February 19 and 20, 2025, the Committee opted to maintain the Monetary Policy Rate at 27.5 per cent, a move that underlines its commitment to balancing inflation control with exchange rate stability.
CBN Governor, Olayemi Cardoso, announced the decision during a press briefing last week, saying, “The committee was unanimous in its decision to hold all parameters and thus decided as follows: “1. Retain the MPR at 27.50 per cent. 2. Retain the asymmetric corridor around the MPR at +500/-100 basis points. 3. Retain the Cash Reserve Ratio of Deposit Money Banks at 50.00 per cent and Merchant Banks at 16 per cent. 4. Retain the liquidity ratio at 30.00 per cent,” Cardoso said.
The decision marks a pause in rate hikes after six consecutive increases in 2024, as the apex bank navigates inflationary pressures, exchange rate volatility, and economic growth concerns.
The committee noted stability in the foreign exchange market, improvements in external reserves, and a gradual moderation in fuel prices as key macroeconomic developments influencing its decision.
This decision is crucial at a time when Nigeria is grappling with the challenge of high consumer prices amid other macroeconomic challenges.
The naira, which had depreciated sharply in 2024, has shown signs of recovery, largely due to increased liquidity in the foreign exchange market and improved transparency measures introduced by the CBN.
Inflation, on the other hand, remains a pressing concern, but the MPC’s policy direction suggests a deliberate strategy as the apex bank aims at achieving single-digit inflation in the medium term.
The Centre for the Promotion of Private Enterprise commended the MPC for pausing rate hikes. The Chief Executive Officer of CPPE, Dr. Muda Yusuf, said, “So, I think it makes sense to retain the rates so that we don’t further exacerbate the pressure of interest rates on businesses and other citizens with exposure to the banks.”
According to him, maintaining the stability of the exchange rate can lead to further price reductions in other products.
Sustaining naira stability through FX market reforms
One of the most significant achievements of the CBN’s ongoing policy reforms is the relative stability of the naira in recent weeks. The exchange rate convergence between the official and parallel markets—previously a major source of arbitrage—has now narrowed significantly, boosting confidence in the market.
As of February 20, 2025, the naira appreciated by 6.95 per cent in the parallel market, trading at N1,510/$, a significant improvement compared to the sharp fluctuations witnessed in 2024.
