By Bassey Udo
There were no earth-shaking surprises in the decisions by the 12 members who attended the 301st meeting of the Monetary Policy Committee (MPC) of the Central Bank of Nigeria (CBN) on July 21 and 22, 2025. The resolutions followed a confident pathway charted by the present leadership at the apex bank to manage the country’s monetary policy over the last two years to help navigate the economy to recovery and sustained growth
During its July 2024 meeting, the Committee resolved to tweak the controlling monetary policy parameters a little bit, by raising the MPR by 50 basis points, from 26.25 percent to 26.75 percent and adjusting the asymmetric corridor around the MPR from +100/-300 basis points to +500/-100.
However, the Committee decided to retain the Cash Reserve Ratio (CRR) of Deposit Money Banks at 45 percent and Merchant Banks at 14 percent, while leaving the Liquidity Ratio (LR) at 30 percent.
Since then, the Committee decided to maintain all monetary policy parameters steady, reasserting its commitment to efforts towards bringing the spiralling inflation in the economy under control through the deft application of the monetary policy tools by the CBN towards building a strong and stable economy.
Specifically, the CBN governor said the Committee agreed to keep the MPR, which stipulates the controlling lending rate for deposit money banks to conduct their lending activities at 27.5 percent; maintain the asymmetric corridor around the MPR at +500/-100 basis points; sustain the CRR for Deposit Money Banks at 50 percent and 16 percent for Merchant Banks, while keeping the Liquidity Ratio unchanged at 30 percent.
The decisions did not significantly depart from the views canvassed by some economic analysts who, prior to the meeting, proposed either the retention of the prevailing policy parameters, or a minimal adjustment downwards to encourage more activities to bolster economic growth.
While some of the analysts were of the belief that the report by the National Bureau of Statistics (NBS) that the current headline inflation declined from 22.97 percent in May 2025 down to 22.22 percent in June 2025 should be sufficient encouragement to persuade the monetary policy authority to consider adjusting downwards the lending rate from the current 27.5 percent, to encourage more borrowing in the economy, others held the view that significant adjustments to the CRR at 50 percent would boost the capacity of banks to make more liquidity available to support the real sector, increase profitability and enhance the capacity to handle outstanding forbearance issues.
Yet, others observed that considering the prevailing macro-economic conditions, particularly the moderating inflationary trend, the second half of the year should be a period when the MPC should shift its monetary policy approach from the hawkish mode to dovish, by treading cautiously as inflation is moderating and the exchange rate remains stable, amid ongoing risks to growth and price pressures in key sectors of the economy.
In opting to retain all policy rate indicators constant, the CBN governor said the MPC premised its decisions on the need to sustain the momentum of disinflation and
sufficiently contain price pressures, while continuing to address existing and emerging inflationary pressures.
To arrive at its decisions, Cardoso said the Committee took cognisance of the headline inflation in June 2025, which recorded the third
consecutive decline in a month of deceleration as a result of the moderation in energy prices and stability in the foreign exchange market. This decision can hardly be faulted by discerning observers of the economy.
Despite these positive developments, the CBN governor said the Committee noted the growing month-on-month headline inflation, which suggested the persistence of underlying price pressures, coupled with the impact on prices of imported commodities as a result of the rising uncertainties posed by the possibility of a supply chain disruption of the global markets.
However, he acknowledged the strides recorded in the domestic financial market as a result of the CBN’s ongoing reforms.
Citing the stability in the Financial Soundness Indicators (FSIs) in the system as one of the factors to anchor the Committee decisions, Cardoso said this has further strengthened the CBN’s push to forge ahead with its on-going banking recapitalisation exercise.
With eight banks already meeting the full recapitalisation requirements stipulated by the CBN, he said others are making significant progress towards meeting the deadline, a development, he disclosed, has given several unnamed foreign banks the confidence to indicate interest in coming to invest in the country.
The significant positive performance of the banks in the recapitulation exercise and the impact of the fiscal discipline exhibited by the apex bank through its various monetary policy interventions and reforms, Cardoso pointed out, have given more Nigerians the confidence to conduct their business transactions in Naira.
“The sustained stability in the foreign exchange market, accentuated by improved capital flows, earnings from increased crude oil production, rising non-oil exports, and significant investments are encouraging indices as a result of our fiscal discipline through various monetary policy interventions and reforms. Nigerians are having greater confidence in their own currency”, he added.
The CBN had given a 24-month deadline, between April 1, 2024 and March 31, 2026 for all deposit money banks with international licences to raise their minimum paid up capital base to about N500 billion, national banks N200 billion, and regional banks to N50 billion.
Other positive indicators on the positive impact of the apex bank’s fiscal interventions, which the MPC highlighted, included the sustained stability in the foreign exchange market, attributed to improved capital flows, earnings from increased crude oil production, rising non-oil exports and significant reduction in aggregate imports.
This, the CBN governor noted, contributed to the country’s real aggregate value of goods and services representing the gross domestic product (GDP) in the first quarter of 2025 rising by about 3.13 percent, compared with 2.27 and 3.38 percent in the corresponding and preceding quarters of 2024, respectively.
As a result of this encouraging development, he said recent data on the Purchasing Managers Index (PMI), which summarizes the capacity of the manufacturing sector in the economy for a month, revealed that the Nigerian economy remained on an expansionary path, amid a stable and resilient external sector, despite persisting uncertainties in the global macroeconomic space.
With the country’s gross external reserves climbing to about $40.11 billion as at July 18, 2025, representing about nine and a half months of import cover for goods, he said the government can heave a sigh of relieve to continue pursuing projects and initiatives aimed at improving the quality of lives for Nigerians, even in the face of socio-economic difficulties in the global economy.
Given the persistent uncertainty in the policy environment and underlying price pressures, Cardoso gave the assurance that the CBN, through the MPC, would continue to maintain its current monetary policy stance till such a time when its monetary and fiscal policy interventions have sufficiently mitigated the risks associated with the high inflation in the economy.
With the renewed commitment by the CBN to pursue its mandate of ensuring price stability through the adoption of appropriate measures to foster stability and confidence in the economy, there is no doubt that the economy will continue to tread on the path of sustained recovery and growth in the long run.
