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The CBN under Olayemi Cardoso has adopted what it called “Orthodox monetary policy” to ease inflation, stabilise the naira and the economy.

Specifically, the apex bank has leaned on a tightening trajectory, raising the rates in order to check inflation, which has become a source of concern in the present administration.

During the meeting in November 2024, the MPC members unanimously voted to increase the benchmark interest rate by 25 basis points to 27.50% from 27.25%.

However, in February, during the first meeting of the year, the MPC decided to hold all key rates by retaining the MPR at 27.5%.

Inflationary trend

As the May meeting gets underway, experts and analysts however projected that the MPC may decide to hold the rates as it monitors the inflationary dynamics.

One of the key considerations would be the inflationary trend, which eased marginally last week; the third time it would slow down in 2025 after the rebasing of the Consumer Price Index (CPI).

Nigeria’s headline Inflation dropped to 23.18% in February 2025, a decrease of 1.30% compared to the January 2025 headline inflation rate.

In the following month inflation increased to 24.23 per cent, showing a 1.05 per cent marginal increase from the 23.18 per cent recorded in February.

Again, the National Bureau of Statistics (NBS) stated last week that the average price of food and other commodities recorded a decline between the months of March and April.

According to the bureau, this led to a marginal drop of 0.52% in headline inflation to 23.71% in April relative to the March 2025 headline inflation rate of 24.23%.

Expectations

Amidst this marginal decrease, analysts say this is not the time to continue further tightening, arguing that maintaining the status quo would enable the authorities to monitor the inflationary trend.

Just last week, the House of Representatives Committee on National Planning and Economic Development warned against the adverse effects of maintaining high interest rates in an attempt to curb inflation.Chairman of the committee, Rep. GboyegaNasiru (APC-Ogun), issued the caution during a meeting with the Statistician-General of the Federation and CEO of the National Bureau of Statistics (NBS), Mr. AdeyemiAdeniran.Nasiru said the caution was timely as the CBN prepares for its 300th Monetary Policy Committee (MPC) meeting.He noted that while the President Bola Ahmed Tinubu administration had taken bold, market-driven reforms that are beginning to yield results, the persistently high interest rates were stifling key sectors of the economy.Foremost economist and CEO of the Centre for the Promotion of Private Enterprises (CPPE), Dr. Muda Yusuf in a chat with our correspondent, advised that the “tightening option” should not be on the table for now.

According to him, the interest rates are already high and further tightening could worsen the cost of doing business for manufacturers and small business owners.

He said, “The tightening option, I don’t think that should be on the table for now because the rates are already very high, the cash reserve ratio is already 50%, which is the highest anywhere in the world, the MPR is already 27.5 is one of the highest anywhere in the world.

“The asymmetric corridor is +500 basis point around the MPR and it is also very high because when you look at the asymmetric corridor of 500 basis point, that means the MPR itself can go as high as 32.5 that’s what it means. So, the rates are already on the high side, I don’t think we need to be looking at the turn off for that.

“In any case, the last inflation figure showed a slight deceleration in inflation. So, I think they should just keep it the way it is and for me personally,à I wish they could ease the rates a little but it is unlikely that would happen.”

According to him, the present rates are unsustainable for businesses.

“People are borrowing at 30%. What kind of business do you want to do? So that has completely crippled lending.

“Why would anybody take a facility at 30%? What kind of return on investment (ROI) will you get? That’s why you see many companies are going for commercial paper and all of those things, the rates are too high and very prohibitive for business…

“And there are arguments on both sides, but I don’t believe that our rates should be as high as that, it is too high for businesses, especially when you look at other headwinds that they have to cope with. How can you have a competitive private sector, especially when you are talking about production and productivity? You can’t be competitive at a 30% interest rate.”

On his part, a financial analyst, AyokunleOlubunmi said the MPC is likely to hold the rates given that the direction of inflation is not yet clear.

He said, “I think they would hold on rates at the next NPC meeting because we have not really seen the direction of inflation but the CBN governor has said that the major thing driving the MPC decision is inflation data and the last inflation figure that was released, it went down and the one before, it went up. So, there is no clear direction and if you look at the FX, the rates have stabilised.

Devil and Deep Blue Sea

“The CBN is actually between the devil and the deep blue sea, they are looking at the best bad not that there is a best best. So, although I agree it would affect the lending rate, at the same time they also need to attract and retain foreign portfolio investors because if those guys leave now the pressure on Naira might be too much.”

Similarly, analysts at Cordros research projected the MPC meeting will maintain status quo on rates at the second meeting for this year.

At the first meeting in 2025, the committee voted to retain interest rate or Monetary Policy Rate at 27.50 per cent, retain the Cash Reserve Ratio (CRR) at 50 per cent for deposit money banks and 16 per cent for merchant banks.

Cordros in a report stated that since the last MPC meeting, the global economic landscape has grown increasingly volatile and uncertain, primarily driven by persistent trade protectionist policies in the US.

“In our view, the MPC is likely to take these developments into account, particularly the elevated global uncertainty and its adverse implications for naira stability, despite a positive real rate of return, given the current inflation rate.

“Against this backdrop, we expect the MPC to adopt a cautious stance, leaving the Monetary Policy Rate (MPR) unchanged, alongside retaining all other policy parameters in a bid to anchor inflation expectations and maintain the naira’s attractiveness.”

They noted that in the FX market, the naira has come under renewed pressure in addition to heightened global uncertainty stemming from the tariff war triggered capital outflows from foreign portfolio investors, further tightening FX liquidity.

They said, “In addition, international oil prices declined amid expectations of softer global demand and OPEC and its allies’ decision to raise crude oil supply, amplifying concerns about Nigeria’s external earnings outlook and the sustainability of its FX reserves.

“As such, the CBN increased its intervention in the FX market to meet the shortfall and curb excess naira volatility. Based on data from the FMDQ, CBN’s net inflow into the FX market in March and April reached USD2.61 billion, compared to the net outflow of USD928.40 million in January and February this year, when capital inflows were stronger.

“The external reserves also fell to an 8-month low of USD37.80 billion in April on account of higher FX supply and debt service payments before increasing again to USD38.22 billion as of 12 May. On average, the naira weakened by 3.52% m/m to NGN1,579.80/USD in April from NGN1,524.27/USD in March.

“So far in May, the closing rate has hovered around NGN1,589.00/USD – NGN1,615.00/USD. Looking ahead, we believe risks to the naira’s stability in the near term are tilted to the downside given the persistent global uncertainty despite the ease in US trade tariffs.”

They added that the MPC is expected to weigh the implications of heightened global uncertainty and the persistence of elevated global interest rates, which justify the need to preserve interest rate differentials and limit capital outflows.

“In this context, a rate cut—especially against the backdrop of weaker oil prices and fragile investor sentiment—could undermine foreign investor confidence.

“Accordingly, we expect the MPC to maintain a cautious stance by holding the MPR at 27.5% and leaving all other policy parameters unchanged,” Cordros analysts added.