CBN Holds Interest Rates Steady Amid Inflation Pressures, Eyes Economic Stability

The Central Bank of Nigeria (CBN), in a decisive move during its July 2025 Monetary Policy Committee (MPC) meeting, voted to maintain the Monetary Policy Rate (MPR) at 27.5% for the third consecutive time. This conservative stance underscores the bank’s priority to anchor inflation expectations and preserve macroeconomic stability over stimulating credit growth. CBN Governor Olayemi Cardoso emphasized the need for discipline in the face of persisting inflationary pressures and currency volatility.

Latest figures from the National Bureau of Statistics (NBS) showed headline inflation eased slightly to 22.22% in June from 22.97% in May. However, food and core inflation remain elevated, with monthly increases driven by imported food and essential services such as transport and ICT. Despite marginal improvements, inflation trends remain unstable, prompting the CBN to uphold a tight monetary stance.

Governor Cardoso reiterated that the central bank’s cautious approach is aimed at consolidating the early signs of disinflation. He projected further easing in inflation over the coming months, aided by a stable exchange rate, declining PMS prices, and the anticipated harvest season. Nonetheless, he warned that loosening policy prematurely could reverse fragile gains and threaten investor confidence.

While the naira has seen relative stability since major forex reforms in 2023, high interest rates have made credit more expensive for households and businesses. The CBN maintains that the long-term benefits of stability, improved FX inflows, and investor trust outweigh short-term costs. The bank sees this strategy as essential for laying the groundwork for inclusive and sustainable economic growth.

Economic experts broadly support the CBN’s stance, arguing that the fight against inflation must continue until a consistent downward trend is evident. Analysts from Cowry Asset, FBNQuest, and Coronation Research highlighted the risks of premature rate cuts, particularly regarding foreign investment and currency stability. They emphasized the need for structural reforms to complement monetary efforts and address persistent inflation drivers such as electricity instability and insecurity in food-producing regions.

Source: The sun