CBN holds interest rate at 27.5% amid economic caution

The Central Bank of Nigeria (CBN) has decided to maintain its benchmark interest rate, keeping the Monetary Policy Rate (MPR) steady at 27.5 percent.

This announcement was made by CBN Governor, Olayemi Cardoso, during a press briefing in Abuja on Tuesday, following the 300th meeting of the Monetary Policy Committee (MPC).

Governor Cardoso revealed that the decision to retain the current rate was unanimous among MPC members, who agreed to adopt a cautious approach in light of ongoing economic uncertainties. The move, according to the committee, is aimed at closely monitoring near-term developments before taking further action.

In addition to holding the MPR, the committee also maintained the Cash Reserve Ratio (CRR) at 50 percent and the Liquidity Ratio at 30 percent, reflecting the apex bank’s steady-handed strategy to manage inflation and stabilize the financial system.

“MPC noted the relative improvements in some key macroeconomic indicators expected to support the overall moderation in crisis in the near to medium term,” Cardoso said.

“These include the progressive narrowing of the gap between the Nigerian foreign exchange market, bureau de change (BDC) windows, the positive balance of payments position and the easy price of PMS.

“The 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 committee thus encouraged security agencies to sustain the momentum while the government provides necessary inputs to farmers to further boost food production.”

The CBN governor, however, said the committee acknowledged underlying inflationary pressures mainly driven by high electricity prices, persistent foreign exchange demand, pressure and other legacy structure 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 crisis,” he said.

“Given the relative stability observed in the foreign exchange market, members urged the bank to sustain the implementation of the ongoing reforms to further boost market confidence.”

Cardoso also called on the fiscal authority to strengthen efforts to enhance foreign exchange earnings, especially from oil and non-oil exports, adding that the sectors are “beginning to yield great returns”.