May 20, 2025/CBN
The Monetary Policy Committee (MPC) of the Central Bank of Nigeria (CBN) held its 300th meeting on May 19th and 20th, 2025. The Committee reviewed developments in the global and domestic economies, including risks to the outlook. All twelve members were in attendance.
Decisions of the MPC
The Committee was unanimous in its decision to tighten policy further and thus decided as follows:
- Retain the MPR at 27.5%.
- Retain the asymmetric corridor around the MPR at +500/-100 basis points.
- Retain the Cash Reserve Ratio of Deposit Money Banks at 50% and Merchant Banks at 16%.
- Retain the Liquidity Ratio at 30%.
Considerations
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. These include the progressive narrowing of the gap between the Nigerian Foreign Exchange Market (NFEM) and Bureau De Change (BDC) windows, the positive balance of payments position, and the easing price of PMS. 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 MPC, thus, encouraged security agencies to sustain the momentum while the government provides necessary inputs to farmers to further boost food production.
The Committee, however, acknowledged underlying inflationary pressures driven largely by high electricity prices, persistent foreign exchange demand pressure and other legacy structural factors. The MPC noted new policies introduced by the Federal Government to boost local production, reduce foreign currency demand pressure, and thus lessen the pass-through to domestic prices.
Given the relative stability observed in the foreign exchange market, Members urged the Bank to sustain the implementation of the ongoing reforms to boost market confidence further. The Committee also called on the fiscal authority to strengthen current efforts at enhancing foreign exchange earnings, especially from gas, oil and non-oil exports.
The MPC, however, expressed concerns about the recent decline in crude oil prices, which is attributable to increased production by non-OPEC members and uncertainties associated with U.S. trade policy. These present new challenges for fiscal receipts and budget implementation.
The Committee reaffirmed the continued stability of the banking system following notable improvements in key performance indicators and observed the appreciable progress in the ongoing recapitalization exercise. Members, thus, called on the Bank to sustain its effective oversight of the industry to ensure compliance with regulatory and macroprudential guidelines.
On the strength of these considerations, and driven by the continued uncertain policy environment, exacerbated by ongoing global shocks, members weighed the available policy options and were unanimous in their decision to hold policy to enable a better understanding of near-term developments. Members reaffirmed their commitment to prioritise policies targeted at anchoring inflation expectations and easing exchange rate pressure.
Key Developments in the Domestic and Global Economies
According to the National Bureau of Statistics (NBS), headline inflation (year-on-year) declined to 23.71% in April 2025, compared with 24.23% in March 2025. On a month-on-month basis, it also declined to 1.86% in April 2025, from 3.9% in the previous month.
Both food and core components contributed to the decline in inflation in the period. Food inflation eased further to 21.26% in April 2025 from 21.79% in the previous period. Core inflation also declined to 23.39% in April 2025, compared with 24.43% in March.
Real GDP (year-on-year) grew by 3.84% in the fourth quarter of 2024, compared with 3.46% in the preceding quarter. This improvement was driven by both the oil and non-oil sectors, with the services sector being the major contributor.
Gross external reserves increased by 2.85% to US$38.90bn as at 16th May 2025, from US$37.82bn at end-March 2025. This represents an import cover of 7.6 months for goods and services. The balance of payments (BOP) recorded a surplus of US$1.10bn in the fourth quarter of 2024, compared with US$4.21bn in the preceding quarter, on account of a moderation in the current account surplus.
Although global output growth is expected to remain positive despite existing and emerging headwinds, the International Monetary Fund (IMF) downgraded its global growth forecast to 2.8% in 2025 and 3.0% in 2026, compared with 3.3% in 2024 due to the uncertain policy environment.
Members were, thus, unanimous in their resolution to maintain close surveillance of developments in both the domestic and global environments to enable appropriate policy response to emerging shocks.
The next meeting of the Committee is scheduled to hold on the 21st and 22nd of July 2025.
Olayemi Cardoso
Governor,
Central Bank of Nigeria
20th May 2025
