The Monetary Policy Committee (MPC) of the Central Bank of Nigeria (CBN) has retained the Monetary Policy Rate (MPR) at 27.50% during the 299th meeting held on the 19th and 20th of February 2025.
Key Decisions
The MPC, comprising all twelve members, unanimously agreed to maintain all key monetary policy parameters. The decisions include:
1.Retention of the MPR at 27.50%:The benchmark interest rate remains unchanged, reflecting the committee's focus on taming inflation while supporting economic growth. 2.Asymmetric Corridor Retained:The corridor around the MPR remains at +500/-100 basis points, ensuring a balanced approach to liquidity management. 3.Cash Reserve Ratio (CRR) Unchanged: The CRR for Deposit Money Banks stays at 50.00%, while Merchant Banks retain a 16.00% CRR, aimed at controlling excess liquidity in the banking system. 4.Liquidity Ratio Maintained at 30.00%;This measure ensures that banks maintain sufficient liquidity to meet short-term obligations.
Economy
The Bank expressed satisfaction with recent macroeconomic developments, particularly the stability in the foreign exchange market and the gradual appreciation of the exchange rate. However, the committee highlighted the persistent inflationary pressures driven by rising food prices as a significant concern.
The recent rebasing of the Consumer Price Index (CPI) by the National Bureau of Statistics (NBS) was acknowledged as a step toward reflecting current consumption patterns. The committee expressed optimism that improved security in food-producing communities and other measures to enhance food supply would lead to a moderation in food prices.
External Improvements
The committee noted the positive impact of improvements in the external sector, including the convergence of exchange rates between the Nigeria Foreign Exchange Market (NFEM) and the Bureau de Change (BDC). Measures such as the Electronic Foreign Exchange Matching System (B-Match) and the Nigeria Foreign Exchange Code were commended for fostering transparency and credibility in the market. These efforts are expected to boost investor confidence, leading to increased foreign direct and portfolio investments, as well as diaspora remittances.
Banking Sector
The MPC urged the CBN to maintain its surveillance of the banking sector, particularly in light of ongoing recapitalization efforts. The committee stressed the importance of ensuring the injection of quality capital to strengthen the financial system.
Domestic Developments
Domestically, headline inflation stood at 34.80% year-on-year in December 2024, with food inflation easing slightly to 39.84%. Following the rebasing of the CPI, headline inflation for January 2025 was recorded at 24.48%, with food and core inflation at 26.08% and 22.59%, respectively. Real GDP growth for the third quarter of 2024 was 3.46%, driven by both the oil and non-oil sectors.
Global Developments
Globally, the MPC identified the ongoing Russia-Ukraine war and tensions in the Middle East as key risks to economic growth. Additionally, the adoption of increased tariffs by the new US administration and retaliatory measures by trading partners could lead to elevated inflation and slower growth in 2025. Despite these challenges, the International Monetary Fund (IMF) has maintained its global growth projections for 2025 and 2026 at 3.3%.
