Long before the Monetary Policy Committee (MPC) of the Central Bank of Nigeria (CBN) held its 300th meeting from May 19 to 20, 2025, many financial and economic experts have predicted the outcome, based on observable trends and trajectories. They predicted that the apex bank would leave the benchmark interest rate, also known as the Monetary Policy Rate (MPR), unchanged at 27.50 per cent.
Indeed analysts at the Bismarck Rewane’s Financial Derivatives Company (FDC), Cordros Capital Group, Afrinvest West Africa and Arthur Steven Asset Management, among others, predicted that not just the MPR, the CBN was sure to leave all other parameters unchanged, looking at developments within and outside Nigeria. Cordros Capital analysts, for instance, said: “Since the last MPC meeting, the global economic landscape has grown increasingly volatile and uncertain, primarily driven by persistent trade protectionist policies in the United States.
‘’In our view, the MPC is likely to take these developments into account, particularly the elevated global uncertainty and its adverse implications for naira stability, despite a positive real rate of return, given the current inflation rate. Against this backdrop, we expect the MPC to adopt a cautious stance, leaving the Monetary Policy Rate (MPR) unchanged, alongside retaining all other policy parameters in a bid to anchor inflation expectations and maintain the naira’s attractiveness,” the analysts said.
So when the MPC met last week, the outcome was more of a fait accompli. After reviewing developments in the global and domestic economy, the committee retained the MPR at 27.5%. It also retained the asymmetric corridor around the MPR at +500/-100 basis points, retained the Cash Reserve Ratio (CRR)of Deposit Money Banks (DMBs) at 50% and Merchant Banks at 16%, and also retained the Liquidity Ratio at 30%. Much like the experts and analysts have predicted.
Many have also lauded the CBN for this outcome. The Chief Executive Officer of the Centre for the Promotion of Private Enterprise (CPPE) Muda Yusuf said the current disruptions caused by President Donald Trump’s tariff hikes required caution due to the Nigerian economy’s vulnerability to global developments, adding that holding rates was a needed buffer against global shocks to stabilise the nation’s economy.
He also said that the CBN’s decision to hold rates aligned with the expectations of the center and many analysts, adding that the relief currently being experienced globally was as a result of a pause in rates between China and the United States for a period of 90 days, which is more than enough to give Nigerians some respite until the next MPC meeting.
It is also heartwarming to know that the Chairman, House of Representatives Committee on National Planning and Economic Development Rep Gboyega Nasiru (APC-Ogun) believes the decision by the CBN to retain the MPR at 27.50 percent will offer relief to Nigerians, particularly in terms of borrowing and business operations. In an interview after the MPC meeting, he said the apex bank’s decision reflects a more accommodative stance after months of consistent rate hikes aimed at curbing inflation.
Rep Nasiru said, “Inflation has been dropping month-on-month, from about 3.9 percent to around 1.86 percent. That shows progress, and we commend the CBN for recognising this and choosing to hold the rate. It signals stability and should encourage more business activity….Most commercial banks peg their lending rates on the MPR plus additional margins. If the MPR had increased again, it would have meant higher borrowing costs for everyone.”
The MPC, which is headed by the CBN Governor Dr Olayemi Cardoso, has other members that include CBN deputy governors and other financial experts. The committee has a responsibility to review economic and financial conditions in the economy; determine appropriate stance of policy in the short to medium term; review regularly the CBN monetary policy framework and adopt changes when necessary; and communicate monetary/financial policy decisions effectively to the public and ensure the credibility of the model of transmission mechanism of monetary policy.
It is therefore not unaware of the effect of its pronouncements on the economy, especially in the area of investments, manufacturing, etc. The outcome of MPC meetings usually go a long way in setting the pace of the financial services sector and the economy as a whole.
The bitter truth is that the CBN has a responsibility to ensure that our economy works. Policies must not be ditched because of the little discomfort they will cause, or because some people think otherwise for no discernible reasons. When doctors prescribe injections and doses of medications to a patient, for instance, they know their will be some discomfort. But they always look at the bigger picture: ie the necessity of the injection and medication to return the patient to sound health or save him from falling ill. So we should always give the apex bank’s MPC the benefit of the doubt and understand the thinking behind its actions.
