CBN Retains MPR at 27.5% to Sustain Disinflation and Stabilize Economy

The Central Bank of Nigeria (CBN) has decided to retain the Monetary Policy Rate (MPR) at 27.5%, following the conclusion of its 301st Monetary Policy Committee (MPC) meeting on Tuesday, July 22, 2025. This decision, aimed at preserving the recent disinflationary momentum in the Nigerian economy, underscores the apex bank’s continued focus on balancing inflation control with broader macroeconomic stability.

CBN Governor, Dr. Olayemi Cardoso, who briefed journalists after the meeting, emphasized that the unanimous vote by all 12 MPC members to maintain the MPR reflects a shared confidence in the current policy trajectory. He noted that “the decision was premised on the need to sustain disinflation and sufficiently contain price pressure.”

The MPR, a critical tool in Nigeria’s monetary policy framework, serves as the benchmark interest rate, influencing lending rates across the banking sector. The CBN’s decision to hold it steady suggests confidence in the gradual progress made in curbing inflation, even as exchange rate volatility and high living costs persist.

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Key Monetary Policy Decisions

During the meeting, the MPC also announced the following key decisions:

• Retain the MPR at 27.5%
• Maintain the asymmetric corridor around the MPR at +500/-100 basis points
• Keep the Cash Reserve Ratio (CRR) for Deposit Money Banks at 50% and Merchant Banks at 16%
• Maintain the Liquidity Ratio at 30%

Cardoso stated that the current stance would be maintained to consolidate existing gains and provide room for further assessment of policy impacts. “Maintaining the current policy stance will continue to address existing and emerging inflationary pressure,” he said. “The MPC will continue to undertake rigorous assessment of economic conditions, price developments and outlook to inform future policy decisions.”

Mixed Sentiments Among Analysts

In the run-up to the meeting, financial analysts were split over the likely direction of the MPR. While some had anticipated a marginal increase in interest rates to bolster the naira and stem capital flight, others projected a hold position due to sluggish economic growth and high borrowing costs facing Nigerian businesses.

Ultimately, the decision to maintain the MPR indicates a balanced approach by the CBN, which aims to fight inflation without stifling the recovery of a still-vulnerable economy.

Nigerians Favor Lower Interest Rates

Despite the CBN’s rationale, recent surveys have revealed that many Nigerians are calling for a reduction in interest rates. A new CBN-conducted survey found that 62.4% of respondents believe interest rates should be lowered, citing concerns about the high cost of borrowing and the strain on household income and business capital.

When asked to choose between keeping interest rates high to curb inflation or lowering them to enhance credit accessibility, 45% favored a reduction, while 40.3% supported continued high rates to keep inflation in check. The remaining respondents were either neutral or unsure of their stance.

This divergence between public sentiment and central bank policy highlights the complexity of monetary policymaking in a challenging economic environment. Inflation has slowed modestly in recent months, but it remains elevated and far from the CBN’s target range, leaving policymakers with limited room for maneuver.

CBN Stands Firm on Inflation Fight

Governor Cardoso reaffirmed the Bank’s commitment to achieving price stability while supporting economic growth. He stressed that the CBN would not rush to alter its course without clear signs that inflation has been firmly tamed.

“The monetary authority must maintain vigilance,” he said. “Our approach remains data-driven, and we will adjust our strategy as economic conditions evolve.”

The decision to retain the MPR at 27.5% also sends a strong signal to domestic and international investors that Nigeria’s monetary policy remains disciplined and responsive to inflation dynamics, even amid mounting social and economic pressures.

Outlook: Watchful Patience Amid Uncertainty

Looking ahead, the MPC’s decision suggests that the CBN is adopting a watch-and-wait strategy, closely monitoring how previous tightening measures affect the economy before making new adjustments. The apex bank is clearly hoping that the disinflationary trend will continue without choking off economic recovery.

However, policymakers are under growing pressure to address widespread discontent over the cost of living, credit access, and unemployment—issues that monetary policy alone may not resolve.

For now, the decision to hold the line on interest rates represents a careful balancing act by the CBN, one that aims to sustain recent progress while keeping the door open to more aggressive action should inflation resurface.