Market News

BY Oluwakemi Abimbola, Sami Tunji, Arinze Nwafor, Anozie Egole and Josephine Ogundeji

The Monetary Policy Committee of the Central Bank of Nigeria has retained the Monetary Policy Rate at 27.5 per cent for the third consecutive time in 2025, opting to keep all key policy parameters unchanged.

The Governor of the CBN, Olayemi Cardoso, disclosed this at a press briefing in Abuja on Tuesday following the conclusion of the committee’s 301st meeting held between July 21 and 22.

This came as the  Lagos Chamber of Commerce and Industry warned that retaining the Monetary Policy Rate at 27.5 per cent translates to a major burden on businesses, amid the high rate of inflation nationwide.

Cardoso said the decision was taken to sustain the ongoing momentum of disinflation and to contain emerging inflationary pressures, noting that the policy stance would continue until risks to inflation had declined sufficiently.

The committee maintained the asymmetric corridor at +500/-100 basis points, the Cash Reserve Ratio at 50 per cent for Deposit Money Banks and 16 per cent for Merchant Banks, and the Liquidity Ratio at 30 per cent.

The CBN governor highlighted the continuing stability of the banking sector, noting that eight banks had already met the new recapitalisation requirements, while others were making steady progress. He assured that the apex bank would maintain close oversight to ensure resilience and soundness within the financial system.

The economy showed further signs of stability, with Nigeria’s Gross Domestic Product growing by 3.13 per cent in the first quarter of 2025, up from 2.27 per cent in the same period last year.

The Purchasing Managers’ Index also pointed to an expansionary trend in business activity.

On the external front, gross external reserves rose to $40.11bn as of July 18, 2025, providing about 9.5 months of import cover. Cardoso also acknowledged the Federal Government’s recent efforts to support agricultural production, particularly in improving security and providing farm inputs such as fertilisers and high-yield seedlings.

The MPC said its staff projections indicated further inflation moderation in the months ahead, supported by declining petrol prices, stable exchange rates, and the seasonal fall in food prices. However, it emphasised the need for continued vigilance and reaffirmed its commitment to ensuring price stability.

Cardoso further reinforced the rationale behind the monetary policy stance, noting that recent reforms are already yielding results in investor confidence, inflation control, and exchange rate stability. “We recognise that our policy toolkit is working. Inflation is coming down. But our goal is to bring it to single-digit levels,” Cardoso said.

Reacting to the CBN’s decision, the Director-General of LCCI, Dr Chinyere Almona, warned that retaining the Monetary Policy Rate at 27.5 per cent translates to a major burden on businesses. “We must restate that the interest rate at 27.5 per cent remains a depressing burden on businesses. We therefore desire to see a reduction in the Monetary Policy Rate,” Almona said.

The Centre for Promotion of Private Enterprise also weighed in on the decision, with its Director, Dr Muda Yusuf, saying that industry watchers had hoped for a reprieve, as the MPR at 27.5 per cent proved too restrictive for real sector investors. “Some of us felt that we needed to make cheaper funds available for the economy, for investors. We feel that the interest rate at over 30 per cent (commercially) is very prohibitive. It’s impeding growth and investment,” Yusuf said.

On the other hand, the Nigeria Employers’ Consultative Association commended the CBN for sustaining a tight monetary policy stance. NECA’s Director-General, Mr Adewale-Smatt Oyerinde, described the move as a necessary step to consolidate recent economic gains and ensure long-term stability.

The President of the Association of Small Business Owners of Nigeria, Dr Femi Egbesola, affirmed that the CBN’s decision to retain the MPR at 27.5 per cent was a cautious but necessary move aimed at sustaining the gradual decline in inflation and maintaining macroeconomic stability.

However, he noted that high interest rates make access to credit more expensive for small businesses, limiting their ability to expand, restock, or invest in productivity.

The next meeting of the MPC has been scheduled for Monday, September 22, and Tuesday, September 23, 2025.

CBN’s decision sparked sharp debate among economists and financial experts, highlighting a deepening divide over how best to balance inflation control with economic growth.

While some argue that the high interest rate continues to stifle access to credit and hinder real sector development, others believe the rate hold is a cautious but necessary move in the face of persistent inflation and global economic uncertainties.

Commenting on the committee’s decision, former Chief Economist at Zenith Bank, Marcel Okeke, criticised the MPC for maintaining the rate, which he claimed was damaging to the real economy.

“The tight monetary policy of the Central Bank of Nigeria is injurious; it is dangerous to many operators in the economy. To any business that needs funding, the high interest rate is injurious. As a matter of fact, many small businesses have been crowded out of the financial system. They cannot access funds.

“With MPR at 27.50 per cent, the effective interest rate that Deposit Money Banks would be charging when you need money will certainly range between 30 and 35 per cent. So, if you get funds at those rates, what business are you doing to be able to generate enough to repay the funds at that rate and remain in business?” he wondered,

Renowned Nigerian economist, Professor Akpan Ekpo, said the decision of the MPC was ‘better’ despite its cooling impact on the real sector in terms of the cost of funds.