The Central Bank of Nigeria’s (CBN) Monetary Policy Committee (MPC) convenes today amid high anticipation from economists and investors, as the committee grapples with whether to continue its tight monetary stance or begin easing interest rates. After months of aggressive tightening, Nigeria’s inflation appears to be moderating, with the latest Consumer Price Index (CPI) showing a decline to 23.71% in April from 24.23% in March. However, global uncertainties, including oil price volatility and U.S. trade policy shifts, pose risks that could disrupt this fragile progress. At its last meeting in February, the MPC maintained the Monetary Policy Rate (MPR) at 27.5% and upheld its cautious stance.
Governor Olayemi Cardoso emphasized that the CBN’s conservative approach is yielding positive outcomes, pointing to the recent dip in inflation and improved CPI methodology that more accurately captures economic trends. However, inflation remains volatile, driven mostly by food prices and fluctuating global energy costs. The April inflation decline is largely attributed to broad-based easing across food, core, and energy components, helped by off-season harvests and reduced utility prices. Still, any policy adjustment will require weighing inflation trends against global risks that threaten naira stability and investor sentiment.
On the global front, rising trade tensions and protectionist policies—particularly from the United States—have added to economic uncertainty. While the U.S. Federal Reserve has kept interest rates steady despite disinflation and a slowdown in economic activity, central banks in the UK and Europe have opted to cut rates to stimulate growth. The contrasting monetary policies across major economies have made the global financial environment more volatile, raising concerns over capital flows and exchange rate stability in emerging markets like Nigeria.
Despite these challenges, Nigeria’s domestic indicators have shown signs of resilience. Economic activity has picked up across key sectors, as indicated by improvements in the Purchasing Managers Index (PMI), and oil production is gradually recovering. International institutions such as the IMF and World Bank maintain optimistic growth projections for Nigeria, expecting GDP to expand by 3.2% to 3.9% in 2025. However, FX pressures persist due to capital outflows and declining oil revenues, prompting increased CBN intervention to stabilize the naira and meet foreign currency demand.
Market analysts are divided on what the MPC’s decision should be. While some, like Johnson Chukwu of Cowry Asset Management, believe a symbolic 25 basis-point rate cut could signal the start of a gradual policy shift, others like Esther Mayowa of Cordros Securities urge caution, citing inflation risks and naira vulnerability. The consensus suggests the MPC may choose to hold rates steady for now, reflecting the delicate balance between supporting economic recovery and maintaining macroeconomic stability in an uncertain global landscape.
Source: The Sun