![The Central Bank of Nigeria, CBN. [PHOTO CREDIT: Ehud Kaduna]](https://i0.wp.com/media.premiumtimesng.com/wp-content/files/2022/01/20200913_161409-scaled-e1652250793565.jpg?fit=2387%2C1702&ssl=1)
The Central Bank of Nigeria on Tuesday kept its key interest rate unchanged at 27.5 per cent.
The decision, announced by CBN Governor Olayemi Cardoso at the end of a two-day Monetary Policy Committee (MPC) meeting in Abuja, marks the second time in a row that the bank has opted to hold the rate steady.
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The bank had steadily raised the rate from 11.5 per cent in 2022, including six hikes in 2024 alone, amounting to a cumulative 875 basis points.
Mr Cardoso said the committee’s decision to maintain the rate was unanimous and driven by recent positive macroeconomic indicators.
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“The MPC noted the relative improvements in some key macroeconomic indicators which are expected to support the overall moderation in prices in the near to medium term.
“Members also noted with satisfaction the progressive moderation in food inflation, and therefore commended the government for implementing measures to increase food supply as well as stepping up the fight against insecurity, especially in farming communities.
“The MPC thus encouraged security agencies to sustain the momentum while the government provides necessary inputs to farmers to further boost food production,” he said.
The benchmark interest rate, formally known as the Monetary Policy Rate (MPR), is a key tool used by central banks to influence borrowing costs, inflation, and overall economic activity.
The committee also left other key policy parameters unchanged, including the asymmetric corridor around the MPR at +500/-100 basis points. It retained the Cash Reserve Ratio (CRR) for commercial banks at 50 per cent and 16 per cent for merchant banks. The liquidity ratio was also kept at 30 per cent.
According to him, the MPC noted the relative improvements in some key macroeconomic indicators which are expected to support the overall moderation in prices in the Near to medium term.
These include the progressive narrowing of the gap between the Nigeria foreign exchange market, and BDC windows, the positive balance of payments position and easing price of PMS.
ALSO READ: CBN retains interest rate at 27.5%
He said members also noted with satisfaction the progressive moderation in food inflation, and therefore commended the government for implementing measures to increase food supply as well as stepping up the fight against insecurity, especially in farming communities.
“The MPC thus encouraged security agencies to sustain the momentum while the government provides necessary inputs to farmers to further boost food production. The committee, however, acknowledged underlying inflationary pressures driven largely by high electricity prices, persistent foreign exchange demand pressure and other legacy structural factors.
“The MPC noted new policies introduced by the federal government to boost local production, reduce foreign currency demand pressures, and thus lessen the pass through to domestic prices,” he said.
