May 20, 2025/Coronation Flashnote
Monetary Policy Committee (MPC) Decision (all 12 members were in attendance)
- The MPC held Monetary Policy Rate steady at 27.50%.
- The asymmetric corridor around the MPR was retained +500bps /-100bps.
- Cash Reserve Ratio for Deposit Money Banks retained at 50.00%.
- CRR for Merchant Banks retained at 16.00%.
- Liquidity ratio retained at 30.00%.
In line with our projection, the benchmark policy rate was left unchanged. All the members of the Committee unanimously voted to hold it at 27.50%. The MPC noted improvements in key macroeconomic indicators that should support price moderation soon, which includes the progressive narrowing of the Nigerian Foreign Exchange Market and Parallel market rates gap (foreign exchange markets), falling price of Premium Motor Spirit (PMS) and the positive balance of trade position. Given the relative stability observed in the foreign exchange market, members urged the Bank to sustain the implementation of the ongoing monetary reforms to further boost market confidence.
The MPC reaffirmed the continued stability of the banking system following notable improvements in key performance indicators and observed the appreciable progress in the ongoing capitalization exercise.They encouraged the fiscal authorities to strengthen current efforts at enhancing foreign exchange earnings, especially from gas, oil, and non-oil exports.
The Committee expressed satisfaction with the progressive moderation in food prices, commending the government for putting in place measures to increase food supply as well as fighting insecurity, especially in farming communities. They also acknowledged new policies by the Federal Government to boost local production and reduce foreign currency demand pressures.
They encouraged the security agencies to sustain their current momentum while the government should continue to supply the necessary inputs to farmers to further boost production. The Committee however recognizes underlying inflation pressures driven by high electricity prices, persistent foreign exchange demand pressure and legacy structural factors.
The MPC expressed concern about the recent decline in crude oil prices attributable to increased production by non- OPEC members as well as uncertainties with US trade policies. This will present new challenges to fiscal receipts and budget implementation.
On the strength of these considerations and driven by the continued policy uncertainty exacerbated by ongoing global shocks, members weighed their policy options and were unanimous in their decision to hold the rate until they received a better understanding of near-term developments. And they re-affirmed their commitment to prioritize policies targeted at anchoring inflation expectations and easing exchange rate pressures.
The next MPC meeting is scheduled to hold on 22nd and 23rd July 2025. We anticipate a potential reduction in rates if the inflation continues to trend downwards in the interim.
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