CBN Holds Interest Rate to Curb Inflation, Spur Growth Amid Fragile Economic Gains
The Monetary Policy Committee (MPC) of the Central Bank of Nigeria (CBN) has decided to maintain the benchmark interest rate at 27.5% for the second consecutive time, alongside unchanged policy parameters, in an effort to rein in inflation and stabilize the naira. This decision, announced at the MPC’s 300th meeting, reflects a cautious stance aimed at anchoring inflation expectations and managing liquidity. While the move has been praised for maintaining monetary discipline, critics warn that persistently high borrowing costs could stifle investment and consumer spending, thus impeding economic recovery in key sectors.
According to the National Bureau of Statistics, inflation in April 2025 declined to 23.71% year-on-year, from 24.23% in March. However, core inflation remains high at 23.39%, fueled by increased electricity tariffs and naira depreciation. CBN Governor Olayemi Cardoso acknowledged these pressures but expressed optimism that the recent stability in exchange rates and fuel prices could temper inflation going forward. Analysts agree that while fiscal and monetary actions are aligning positively, the structural roots of inflation—such as supply chain issues and insecurity—remain unresolved.
Positive signs are emerging, particularly in external reserves and food price stabilization. External reserves rose by 2.9% to $38.9 billion, offering a buffer against external shocks. Analysts credited government agricultural initiatives and security interventions for easing food inflation. Additionally, domestic fuel supply has improved due to the Dangote Refinery’s capacity ramp-up, reducing reliance on imports. Despite a global rebound in oil prices, projections of increased supply from OPEC and non-OPEC members offer a somewhat bearish outlook that could help control domestic energy costs.
Experts also highlighted the naira’s improved stability, driven by strategic CBN reforms such as FX unification and backlog clearance. Though the currency has depreciated, it now trades within a narrower range between official and parallel markets, enhancing investor confidence. Market participants noted that while risks remain, reduced volatility and more predictable exchange rate movements are making Nigeria a more attractive investment destination. Continued policy discipline could foster capital inflows and improve long-term macroeconomic stability.
Despite these advances, Nigeria’s growth trajectory remains fragile. GDP growth is still sluggish, and structural weaknesses persist. Governor Cardoso emphasized the need for sustained reforms, citing previous excessive money supply and fiscal imprudence—such as the N22.7 trillion in Ways and Means financing—as drivers of past instability. While inflation has moderated and investor interest is reviving, a complex road lies ahead. For businesses and households, high costs and limited access to credit continue to pose real challenges in the near term.
Source: Punch