The Monetary Policy Committee of the Central Bank of Nigeria has retained the Monetary Policy Rate (interest rate) at 27.50 per cent, marking its second consecutive hold in 2025.
This decision was announced by the CBN Governor, Mr Olayemi Cardoso, during a press briefing on Tuesday in Abuja, following the conclusion of the MPC’s 300th meeting. This second pause in rates comes after six consecutive hikes recorded in 2024.
But the Chairman of the Organised Private Sector of Nigeria, Dele Oye, maintained his advocacy for a reduction of the MPR to prevent slowed business growth. Oye condemned the existing rate, stressing that its impact on the real sector had been adverse.
At the meeting, Cardoso said, “The committee was unanimous in its decision to hold policy and thus decided as follows: Retain the MPR at 27.50 per cent,” adding that the pause would enable members to better understand near-term developments in the economy.
With this move, the CBN retained the asymmetric corridor around the MPR at +500/-100 basis points, the Cash Reserve Ratio of Deposit Money Banks at 50.00 per cent, and that of Merchant Banks at 16.00 per cent, while keeping the Liquidity Ratio unchanged at 30.00 per cent.
The MPC based its decision on recent improvements in macroeconomic indicators. According to the National Bureau of Statistics, headline inflation dropped to 23.71 per cent in April 2025 from 24.23 per cent in March.
On a month-on-month basis, inflation also declined significantly from 3.9 per cent to 1.86 per cent. Food inflation fell to 21.26 per cent from 21.79 per cent, while core inflation eased to 23.39 per cent in April from 24.43 per cent in March.
The committee noted these developments with cautious optimism. “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,” Cardoso said.
He also acknowledged the efforts of the government in improving food supply and tackling insecurity in farming communities. Despite these gains, the CBN expressed concern about lingering inflationary pressures driven by high electricity costs, persistent demand for foreign exchange, and structural issues within the economy.
The committee welcomed reforms introduced by the Federal Government aimed at boosting local production and reducing demand for forex, noting that such moves would help dampen inflationary pass-through.
The MPC also reviewed developments in the foreign exchange market and urged the apex bank to continue implementing reforms to enhance investor confidence.
The governor noted that Nigeria’s gross external reserves increased by 2.85 per cent to $38.90bn as of May 16, 2025, compared to $37.82bn at the end of March, representing 7.6 months of import cover.
Cardoso said the committee was encouraged by the progressive narrowing of the gap between the official and parallel forex market rates and urged the fiscal authorities to intensify efforts to grow FX earnings, particularly from oil, gas, and non-oil exports.
The committee further acknowledged the improvement in Nigeria’s real GDP, which grew by 3.84 per cent in the fourth quarter of 2024, up from 3.46 per cent in the previous quarter, driven by both oil and non-oil sectors, especially services.
However, Cardoso noted concerns about declining crude oil prices, which could threaten fiscal revenues. “The committee expressed concerns about the recent decline in crude oil prices, attributable to increased production by non-OPEC members as well as uncertainties associated with U.S. trade policy, which present new challenges for fiscal receipts and budget implementation,” he said.
The MPC commended the relative stability in the banking sector and called on the apex bank to sustain effective oversight amid the ongoing recapitalisation exercise.
“Members reaffirmed their commitment to prioritise policies targeted at anchoring inflation expectations and easing exchange rate pressure,” the governor said. The next MPC meeting is scheduled for July 21 and 22, 2025.
OPS reacts
Meanwhile, the OPSN chairman, Oye, insisted that the MPR should be reduced to prevent slowed business growth. “The economy cannot run on the 27.5 per cent interest rate. Nobody can borrow money at the current rate and make a profit from business,” he stated.
Oye, who also presides over the Nigerian Association of Chambers of Commerce, Industry, Mines and Agriculture, maintained that an increase in the benchmark interest rate, while able to control inflation, often leads to higher costs and increased uncertainty for businesses, which negatively impacts business operations and growth prospects.
He explained, “A hike in the interest rate by CBN can have several potential consequences for businesses, including increased borrowing costs and higher interest rates, which means that loans and lines of credit become more expensive, increasing the cost of financing for businesses, thus increasing operational costs.
“As borrowing becomes more expensive, businesses may delay or scale back on investments for expansion, new projects, or capital improvements. This can slow down business growth and innovation and decrease consumer spending.”
The OPS chairman argued that higher interest rates also lead to increased borrowing costs, which reduce consumers’ disposable income, resulting in lower consumer spending. He decried the effects of weakened consumer spending on the retail and service sectors.
The Association of Small Business Owners of Nigeria’s National President, Dr Femi Egbesola, commended the CBN for retaining the MPR at this meeting, especially after several consecutive hikes. He, however, called for a reduction in the future.
He said, “It shows a shift towards caution and a recognition of the strain previous increases have placed on the economy. However, I strongly appeal for a downward review of the rate in the near future. The current interest rate remains too high for small businesses to access credit and grow.
“For us to stimulate production, create jobs, and truly support MSMEs, we need a more accommodative monetary policy that lowers the cost of borrowing.”
Speaking on the adjustment of the MPR, the National Vice President of the Nigerian Association of Small Scale Industrialists, Segun Kuti-George, said, “MPR rates are adjusted upward or downward as an instrument to control inflation, when it goes up, investment increases, and people would spend less as this would bring down inflation.
“Hence, because inflation has stabilised, I want to believe they are taking it to keep it at the current level, and watch to see if the prices of things would come down so as to adjust it downward. However, the decrease in inflation is very insignificant for a decrease in MPR, yet I think it’s the right decision they are taking.”
