Amid global economic turbulence and persistent inflation, the Central Bank of Nigeria (CBN) has decided to maintain all key monetary policy tools unchanged. At its July 2025 Monetary Policy Committee (MPC) meeting, the Bank left the Monetary Policy Rate at 27.5% for the third consecutive time, aiming to consolidate the recent decline in inflation while preventing a resurgence. The decision reflects the apex bank’s cautious approach to sustaining disinflation efforts amidst fragile global financial conditions and domestic cost pressures.
While headline inflation dropped to 22.22% in June from 22.97% in May, monthly inflation slightly increased, pointing to ongoing short-term price pressures. Food and core inflation also rose, indicating deeper structural issues like logistics bottlenecks and insecurity in agricultural zones. The CBN acknowledged this complex inflation picture and stressed that any premature easing could reverse recent gains. Governor Yemi Cardoso emphasized that the current tight monetary policy is essential to drive inflation toward single digits.
The CBN also highlighted progress in foreign exchange market reforms, including the unification of FX windows and improved exchange rate management. With gross reserves at $40.11bn and the naira stabilizing between N1,500–N1,550 per dollar, the Bank credited improved oil output, remittance inflows, and reduced imports for the relative calm. However, external risks such as geopolitical instability and potential rate hikes in developed economies could still trigger capital outflows and FX volatility.
Another key focus of the MPC was the ongoing recapitalisation of banks. Eight banks have met new capital requirements so far, with others progressing toward compliance. The CBN is using this reform to bolster the financial sector’s resilience to credit risk amid high interest rates and inflation. While larger banks are coping, concerns remain about smaller banks’ ability to meet the new thresholds without systemic disruption. The CBN has pledged to provide regulatory support and ensure smooth consolidation.
The decision to hold interest rates has sparked mixed reactions from the business community. Many businesses, especially SMEs, report that high borrowing costs are now a top constraint, overtaking power shortages and insecurity. While some economists argue that tight policy is hurting the real sector, others, including the Nigeria Employers’ Consultative Association, support the CBN’s strategy, citing long-term stability benefits. Cardoso insists that despite short-term pain, the policy stance is necessary to curb inflation and rebuild investor confidence.
Source: Punch