The Central Bank of Nigeria (CBN) has taken a decisive step towards stabilizing the naira and curbing inflation, marking a significant shift in the country’s macroeconomic landscape.
At the 299th Monetary Policy Committee (MPC) meeting, the CBN opted to maintain the Monetary Policy Rate (MPR) at 27.5%, a move that underscores its commitment to balancing inflation control with exchange rate stability.
Key Highlights of the MPC Decision
– Retain MPR at 27.50%: The CBN has decided to maintain the current policy rate, signaling a pause in rate hikes after six consecutive increases in 2024.
-Stability in Foreign Exchange Market: The committee noted improvements in external reserves and a gradual moderation in fuel prices as key macroeconomic developments influencing its decision.
-Naira Recovery: The naira has shown signs of recovery, appreciating by 6.95% in the parallel market and trading at N1,510/$ as of February 20, 2025.
The CBN has consistently emphasized the importance of market stability, and its interventions in the foreign exchange market have been instrumental in enhancing market efficiency. The introduction of the Electronic Foreign Exchange Matching System and the Nigerian Foreign Exchange Market FX Code has improved liquidity, reduced speculation, and boosted confidence in the market.
While naira stability has been a major win for the apex bank, inflation remains a pressing concern. The CBN has made it clear that it is targeting a reduction of inflation to single digits in the medium to long term. Additionally, the CBN is focusing on strengthening the banking sector, with the introduction of new minimum capital requirements for banks set to take effect in March 2026.
The MPC has emphasized the need for closer coordination between fiscal and monetary authorities to achieve macroeconomic stability. The CBN has expressed its commitment to working with the Federal Government to ensure a harmonized approach to economic management.
The decisions taken at the 299th MPC meeting reflect a cautious but strategic approach to economic management. While high borrowing costs persist, the expectation of easing inflation in the coming months could lead to a more accommodating monetary policy stance later in the year. As Nigeria navigates its economic recovery, the role of the CBN and MPC will remain pivotal in shaping the country’s financial landscape.