In a significant monetary policy decision, the Central Bank of Nigeria (CBN) has opted to maintain the benchmark interest rate at 27.5%.
Other monetary policy decisions were also retained, including the asymmetric corridor at +500/-100 basis points around the MPR, the cash reserve ratio (CRR) at 50 basis points, and the liquidity ratio (LR) at 30%.
This decision, announced by Governor Olayemi Cardoso after the 299th Monetary Policy Committee (MPC) meeting in Abuja, comes on the heels of six consecutive rate hikes throughout 2024.
According to the governor, “The Committee was unanimous in its agreement to hold all parameters”.
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The aggressive rate hikes in 2024 were primarily driven by the need to combat surging inflation, which reached a peak of 33.88% in October 2024. These hikes included a 400 basis points increase in February, followed by subsequent raises of 200 bps in March, 150 bps in May, 50 bps in July, 50 bps in September, and the final 25 bps in November, bringing the rate to the current 27.5%.
Governor Cardoso emphasized that while headline inflation has shown signs of moderation, core inflation remains elevated, largely due to rising energy costs and other structural factors. He noted that the effects of the tightened monetary policy are expected to become more apparent by the first quarter of 2025.
The decision to hold the interest rate steady is also influenced by recent macroeconomic developments, including stability in the foreign exchange market and a gradual decline in inflationary pressures.
In January 2025, a recalibration of the inflation metrics by the National Bureau of Statistics reported an annual inflation rate of 24.48%. Governor Cardoso expressed optimism about this trend, aiming for single-digit inflation rates shortly. However, he cautioned that food prices remain a potential risk to achieving this goal.
