CBN maintains interest rate at 27.5% at 301st MPC amid economic stability efforts

The Central Bank of Nigeria (CBN) announced key decisions from its 301st Monetary Policy Committee (MPC) meeting, held from July 21-22 in Abuja. Governor Olayemi Cardoso, addressing the press, revealed that the MPC voted unanimously to retain the interest rate at 27.5%, signalling a cautious approach to monetary policy amid improving economic indicators. 

The announcement, followed live by our reporter on the CBN’s YouTube channel (@cenbank), underscored the bank’s commitment to balancing inflation control with economic growth.

Key decisions from the CBN’s 301st MPC meeting

The MPC decided to maintain the status quo on several critical monetary policy tools. The Cash Reserve Ratio (CRR) remains at 50% for Deposit Money Banks and 16% for Merchant Banks. 

The Liquidity Ratio (LR) was unchanged at 30%, and the asymmetric corridor around the MPR was retained at +500/-100 basis points. These decisions reflect the committee’s focus on sustaining recent gains in macroeconomic stability while addressing potential inflationary pressures.

Cardoso highlighted concerns about rising liquidity in the banking system, driven by increased statutory revenue distributions through the Federation Account Allocation Committee (FAAC). He warned that this could undermine the CBN’s disinflation efforts if not carefully managed. 

“We are confronted with increased liquidity injections into the banking system, highlighting the need for tight monetary conditions,” Cardoso stated, emphasising the importance of vigilance to prevent renewed inflationary pressures.

The decision to hold rates steady comes as Nigeria’s inflation rate shows signs of moderation. According to the National Bureau of Statistics, inflation eased to 22.22% in June 2025, down from 23.71% in April. 

This decline follows a high of 24.23% in March, driven by factors such as lower fuel prices and a relatively stable naira. The CBN’s conservative stance at the 300th MPC meeting in May, where the MPR was also held at 27.5%, was credited with contributing to this disinflationary trend.

However, challenges persist. Cardoso noted the impact of declining crude oil prices, a critical revenue source for Nigeria, which could strain fiscal receipts and budget implementation. 

Non-OPEC oil production increases and uncertainties surrounding U.S. trade policies were cited as external risks. Domestically, food supply chain disruptions due to insecurity and flooding continue to pose inflationary threats, particularly for food prices, which constitute a significant portion of Nigeria’s inflation basket.

Analysts had mixed expectations leading into the meeting. A survey by the CBN revealed that 62.4% of Nigerian households favoured lowering interest rates to ease borrowing costs, reflecting public concern over the high cost of credit. However, 40.3% supported maintaining or increasing rates to curb inflation. 

Financial institutions like FBNQUEST predicted a potential rate cut, citing cooling inflation and stable naira conditions. In contrast, Cordros Securities advocated caution, warning that premature easing could destabilise the foreign exchange market.

The International Monetary Fund (IMF) has projected Nigeria’s inflation could drop to 18% by 2026, supporting arguments for gradual monetary easing. 

Yet, Cardoso emphasised a measured approach, noting that high yields on Nigerian Open Market Operation (OMO) bills remain crucial for attracting foreign portfolio inflows, which bolster exchange rate stability.

Cardoso reiterated the CBN’s commitment to orthodox monetary policies, a stance he has maintained since taking office in September 2023. 

The bank has implemented reforms to unify foreign exchange market segments, clear outstanding FX obligations, and enhance transparency to attract investment. These measures aim to stabilise the naira and reduce speculative demand for U.S. dollars, a persistent challenge for Nigeria’s economy.

The governor also highlighted ongoing efforts to boost financial inclusion, targeting 80% adult inclusion by 2026 through partnerships with banks and fintech firms. 

Additionally, the CBN is refining governance frameworks for financial institutions to ensure compliance and stability amid the ongoing bank recapitalisation exercise.

The MPC’s decision to maintain the MPR at 27.5% reflects a delicate balancing act. While inflation is easing, structural challenges like food insecurity and global economic uncertainties require careful navigation.

Cardoso expressed optimism that the CBN’s policies would yield more significant results in 2026, particularly in stabilising prices and fostering sustainable growth. The next MPC meeting is scheduled for September 22-23, 2025, where analysts anticipate further discussions on potential rate adjustments if inflation continues to decline.