Monetary Policy Committee (MPC) to retain interest rate in bid to lower inflation

Monday, May 19, 2025 - The Monetary Policy Committee (MPC) of the Central Bank of Nigeria (CBN) commenced a two-day meeting today, with its decision on the benchmark interest rate topping the agenda. The outcome of the meeting is highly anticipated, as it will shape the monetary direction of the country amid easing inflation and global economic uncertainty.

Many financial analysts predict that the committee will maintain the Monetary Policy Rate (MPR) at 27.50 per cent, opting to observe a more established trend in consumer prices before taking any action. The MPC, chaired by the CBN Governor, is responsible for formulating monetary policies that influence the financial services sector and the wider economy.

The National Bureau of Statistics (NBS) recently reported a drop in the headline inflation rate, which fell by 52 basis points to 23.71 per cent in April 2025, down from 24.23 per cent in March. Monthly inflation also saw a decline, reducing to 1.86 per cent in April from 3.90 per cent the previous month.

A broad-based decrease in food prices contributed to the slowdown in inflation. Food inflation eased to 21.26 per cent in April from 21.79 per cent in March, while the monthly rate fell slightly from 2.18 per cent to 2.06 per cent. Core inflation, which excludes volatile items like farm produce and energy, also dropped significantly by 105 basis points from 24.43 per cent to 23.39 per cent. On a monthly basis, core inflation decreased sharply from 3.73 per cent to 1.34 per cent.

Experts and insiders close to the central bank believe the MPC will adopt a cautious approach, likely maintaining the current rates and policy parameters. Analysts from Financial Derivatives Company, Cordros Capital Group, Afrinvest West Africa, and Arthur Steven Asset Management have all echoed expectations of a steady stance, favouring rate retention in light of both domestic inflation trends and global uncertainties.

However, Futureview analysts suggest the CBN might consider a marginal cut in the interest rate, citing the possibility of continued easing in inflationary pressures in the near term.

Cordros Capital analysts noted that global economic instability, particularly stemming from persistent protectionist trade policies in the United States, has heightened uncertainties, which may affect the stability of the naira. They argue that while real returns remain positive, the MPC is likely to maintain a cautious stance to anchor inflation expectations and uphold the currency’s appeal.

“In our view, the MPC is likely to take these developments into account, particularly the elevated global uncertainty and its adverse implications for naira stability, despite a positive real rate of return, given the current inflation rate,” the analysts stated.