The Central Bank of Nigeria (CBN) has retained all key monetary policy rates despite a notable drop in inflation following the rebasing of the economy. Inflation fell from 34.8% to 24.48% in December 2024, yet the Monetary Policy Committee (MPC) decided to hold steady on rates, citing the need for further analysis.
After the 299th MPC meeting in Abuja, CBN Governor Yemi Cardoso emphasized that the bank is still scrutinizing the new inflation metrics introduced by the National Bureau of Statistics (NBS). Despite the more favorable numbers, Cardoso rejected claims that inflation is genuinely declining, although he acknowledged a slight moderation in food prices in recent weeks.
The MPC retained the Monetary Policy Rate (MPR) at 27.50%, kept the asymmetric corridor around the MPR at +500/-100 basis points, maintained the Cash Reserve Ratio (CRR) at 50% for deposit money banks and 16% for merchant banks, and left the Liquidity Ratio unchanged at 30%.
Cardoso cited recent positive macroeconomic indicators, such as exchange rate stability and decreasing petrol prices, as factors that could improve price dynamics in the short to medium term. However, he warned that food-driven inflationary pressures remain a concern.
He also addressed the rebased Consumer Price Index (CPI) by the NBS, which now reflects updated consumption patterns. Cardoso noted that government efforts to improve food security are expected to help further stabilize food prices.
The CBN governor credited recent policy changes—including the introduction of the FX code, subsidy removal, and the elimination of multiple exchange rates—for stabilizing the foreign exchange market.
Cardoso acknowledged global economic risks, particularly rising trade tensions involving the U.S. and its partners, which could lead to higher global inflation and slower growth in 2025.
Market Reactions
Financial experts largely welcomed the MPC’s cautious stance. Investment banker Tolulope Alayande praised the decision, highlighting the importance of maintaining economic stability. Retired banker Mohammed Ande noted that the MPC’s actions were in line with market expectations.
Muda Yusuf, Director of the Centre for the Promotion of Private Enterprises (CPPE), commended the MPC’s approach, calling it a necessary move to shield businesses and households from financial stress. He also pointed out that the newly rebased inflation rate is now lower than the MPR.
However, some experts expressed skepticism. Prof. Chude Nwude from the University of Nigeria, Nsukka, argued that the decline in inflation is misleading due to methodological changes in rebasing the CPI, which now uses December 2024 as the base period. He stressed that food prices, energy costs, and currency-driven inflation remain high.
David Adonri, Vice President of Highcap Securities, warned that maintaining current rates could expose the economy to risks from external shocks and unchecked government spending amid a large fiscal deficit.
As the CBN continues to assess the impact of the rebased economy, Cardoso emphasized the need for patience and vigilance to ensure that policy decisions align with Nigeria’s long-term economic stability.
