Inflation in Nigeria experiences a third straight monthly decline, settling at 22.22%
Nigeria's Monetary Policy Committee Maintains High Interest Rates to Combat Inflation
Nigeria's Monetary Policy Committee (MPC) has decided to maintain the Monetary Policy Rate (MPR) at its record high of 27.50% in its latest meeting. The Central Bank of Nigeria (CBN) aims to sustain monetary tightening to combat persistent inflationary pressures, encourage saving, slow down spending, and keep the naira stable.
The decision reflects a cautious approach that balances inflation control with ensuring economic growth is not stifled, considering ongoing global uncertainties and domestic price pressures.
The inflation rate, though reduced, remains elevated at 22.22%, which is significantly higher than typical central bank targets. The MPC unanimously agreed to hold the MPR steady, showing a commitment to maintaining a firm stance against inflation and uncontrolled price increases.
The committee also maintains other monetary tools like the Cash Reserve Ratio and Liquidity Ratio at high levels to ensure liquidity is carefully controlled. CBN Governor Olayemi Cardoso noted the need to balance monetary tightening efforts with the goal of not halting economic growth, highlighting that stability in interest rates supports controlled inflation without undermining the nation's economic recovery.
The MPC acknowledged government efforts to improve national security and food security, which are critical since food prices have a significant impact on overall inflation. However, the recent Sallah festival resulted in an average 35% surge in livestock and commodity prices, which may not have been fully captured by the National Bureau of Statistics (NBS) survey conducted in the first half of the month.
The MPC is not expected to interpret the current low inflation rate as a premature victory. Norrenberger analysts wrote a note suggesting that the NBS survey may not have fully captured the inflationary impact of recent events. The durability of the disinflation trend is a concern for the MPC, not just a statistical quirk.
The MPC will seek more conclusive evidence that the disinflation trend is durable before contemplating any loosening of its hawkish stance. Maintaining a substantial positive real interest rate is necessary to attract and retain foreign portfolio investment. The spread between the policy rate and the current inflation rate widens the incentive for foreign investors.
The naira's fragile stability is a priority for policymakers. The MPC is expected to hold the MPR at its current level until there is confidence in the durability of the disinflation trend. The committee will continue to monitor economic indicators closely and adjust its policy as necessary to maintain a stable currency and promote sustainable economic growth.
[1] Central Bank of Nigeria (2025). Monetary Policy Committee communique. Retrieved from www.cbn.gov.ng [2] National Bureau of Statistics (2025). Consumer Price Index report. Retrieved from www.nbs.gov.ng [3] Norrenberger (2025). Nigeria's monetary policy outlook. Retrieved from www.norrenberger.com [4] The Guardian (2025). CBN keeps MPR at 27.50% to combat inflation. Retrieved from www.theguardian.com
The Central Bank of Nigeria (CBN) aims to sustain monetary tightening, using instruments like the Cash Reserve Ratio and Liquidity Ratio, to combat persistent inflation and encourage savings, while slowing down spending.
Maintaining a substantial positive real interest rate is necessary for the Central Bank of Nigeria (CBN), as it widens the incentive for foreign investors and supports the naira's fragile stability.
