UPDATED: Again, CBN holds benchmark interest rate at 27.5%

The Central Bank of Nigeria on Tuesday kept its key interest rate unchanged at 27.5 per cent.

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The decision, announced by CBN Governor Olayemi Cardoso at the end of a two-day Monetary Policy Committee (MPC) meeting in Abuja, marks the third time in a row that the bank has opted to hold the rate steady.

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.

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.

Mr Cardoso said the decision was premised on the need to sustain the momentum of disinflation and sufficiently contain price pressures, and maintaining the current policy stance will continue to address the existing and emerging inflationary pressures.

He said the MPC will continue to undertake rigorous assessment of economic conditions, price development and output growth to inform future policy decisions.

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The committee acknowledged the decline in headline inflation in June 2025 the third consecutive month of deceleration.

According to him, this was largely driven by the moderation in energy prices and stability in the foreign exchange market. Despite these positive developments, members observed the uptick in month-on-month headline inflation, suggesting the persistence of underlying price progressions.

The continued global uncertainties associated with the tariff wars and geopolitical tensions could further exacerbate supply chain decisions on the prices of imported items.

“Members also noted the continued stability in the banking system, evidenced by the stable financial soundness indicators, which would further be supported by the ongoing banking recapitalisation exercise.

“The MPC noted that eight banks have fully met the recapitalisation requirements, while others are making progress towards meeting8 the deadline. The committee thus urged the management of the bank to sustain its oversight of the banking system to ensure continued resilience, safety and soundness of the financial system,” he noted.

Inflationary Concerns

Nigeria’s annual inflation rate slowed to 22.22 per cent in June from 22.97 per cent in May, latest data from the said.

The June figure represents a 0.76 percentage point decrease from the previous month. On a year-on-year basis, inflation fell by 11.97 percentage points from 34.19 per cent recorded in June 2024.

The committee acknowledged the efforts of the federal government in improving security and its impact on food production.

“Members thus urged the government to continue its support towards timely provision of high yielding seedlings, fertilizers and other critical inputs for the current farming season.”

“The MPC also noted the sustained stability in the foreign accentuated by improved capital flows, earnings from increased crude oil production, rising non oil exports, and significant reduction in aggregate imports, real GDP in the first quarter of 2025 grew by 3.13 per cent compared with 2.37 and 3.38 per cent in corresponding and preceding quarters of 2024 respectively,” he said.

Nigeria’s GDP rose to N372.8 trillion in 2024 following a rebasing of the country’s economic data to reflect 2019 prices, the National Bureau of Statistics said Monday.

The updated figure, equivalent to $243 billion at an exchange rate of N1,530 to the dollar, marks the latest in a series of revised estimates. According to the NBS, the rebased GDP stood at N205.09 trillion in 2019, climbing steadily to N314.02 trillion in 2023 before reaching N372.82 trillion in 2024.

He referenced the recent data on the purchasing managers index indicates that the Nigerian economy remains on an expansionary path.

The external sector also remains stable and resilient despite persistent uncertainties in the global macroeconomic environment, gross external reserves rose to 40.1 1 billion on 18 July representing about 9.5 months of import cover for both global developments.

Available projections suggest that global output recovery continues at a gradual pace, However, recent developments, especially the persistent tariff war and the geopolitical tensions, may continue to disrupt supply chains and exert upward pressure on the price of imports.

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“This inflation in the advanced economies has slowed, prompting major central banks to be cautious of upside risk to inflation in the emerging markets, central banks continue to calibrate monetary policy to their domestic conditions, noting the persistent risk to inflationary pressures outlook.

“Staff projections indicate a further decline in inflation in the coming months underpin by the current tight monetary policy stance, stable exchange rate, declining PMS prices and moderation in food prices as the harvest season approaches, given the persistent uncertainty in the policy environment and underlying price pressures, monetary policy will need to maintain its current stance until inflation risk recede sufficiently,” he said.

He said the committee remains committed to the bank’s price stability mandate and will take appropriate measures to foster stability and confidence in the economy.

The next meeting of the committee is scheduled for 22 and 23 September.