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In response to persistent global economic turbulence and complex domestic inflation dynamics, the Central Bank of Nigeria (CBN) has opted to maintain its current monetary policy stance. At the July 2025 meeting of the Monetary Policy Committee (MPC), the apex bank held all key policy instruments steady, underscoring its commitment to price stability and macroeconomic resilience.
For the third consecutive time, the Monetary Policy Rate (MPR) remains at 27.5%, while the asymmetric corridor was kept at +500/-100 basis points. The Cash Reserve Ratio (CRR) for deposit money banks and merchant banks also held at 50% and 16% respectively, with the Liquidity Ratio unchanged at 30%.
This decision comes amid signs of easing headline inflation. Data from the National Bureau of Statistics shows inflation dipped to 22.22% in June 2025 from 22.97% in May, marking a third consecutive decline. However, monthly inflation ticked upward to 1.68%, reflecting persistent cost pressures. Food inflation accelerated to 21.97%, while core inflation climbed to 22.76%, highlighting structural and sectoral imbalances.
CBN Governor Olayemi Cardoso reaffirmed the Bank’s intent to sustain the disinflationary trend, stating that monetary tightening will continue until inflation expectations are firmly anchored. He pointed to the impact of past fiscal expansions, which created excess liquidity, and emphasised that a disciplined monetary response is essential.
Cardoso noted that monetary tools such as the MPR and CRR would remain central to guiding expectations and stabilising the economy, particularly as structural bottlenecks in transport, food supply, and logistics continue to drive inflation.
FX Market Reforms and External Sector Stability
Alongside its inflation-targeting strategy, the CBN continues to pursue foreign exchange market reforms. The implementation of a market-driven exchange rate regime has largely unified FX windows and enhanced price discovery. As of July 18, 2025, external reserves stood at $40.11 billion, equating to roughly 9.5 months of import cover.
The naira has shown improved stability, trading between N1,500 and N1,550/USD in the official market. This relative calm is attributed to stronger oil production (above 1.6 million barrels per day), improved FX inflows from diaspora remittances and non-oil exports, and reduced import volumes. The CBN has injected over $4.1 billion into the FX market in H1 2025 to stabilise supply.
Governor Cardoso affirmed that these reforms are permanent and part of a broader strategy to build investor confidence, support remittance inflows, and curtail speculative demand.
Banking Sector Recapitalisation and Resilience
The MPC also discussed progress in the ongoing recapitalisation of the banking sector. Eight banks have so far met the new capital thresholds, with others progressing toward compliance. The recapitalisation push is intended to strengthen financial system stability in light of higher credit risks, rising inflation, and tighter borrowing conditions.
Key banking indicators remain sound: Capital Adequacy Ratios are above regulatory minimums, liquidity levels are healthy, and the Non-Performing Loan (NPL) ratio is within the 5% benchmark. However, the CBN continues to monitor the system closely, especially with regard to smaller banks.
Balancing Inflation Control with Growth
Nigeria’s economic growth stood at 3.13% in Q1 2025, an improvement from 2.27% in the same period of 2024. However, structural inflation remains a challenge, especially in food and services, driven by insecurity, transport costs, and outdated agricultural practices.
While the CBN’s tight monetary stance is helping to curb inflation, the Bank reiterated that monetary policy alone is insufficient. Governor Cardoso called for enhanced fiscal coordination, targeted social investments, and security improvements to address supply-side issues.
Stakeholder Reactions
The decision to retain policy rates has generated mixed reactions. The Lagos Chamber of Commerce and Industry warned that high interest rates pose a serious burden on businesses. Likewise, former Zenith Bank Chief Economist Marcel Okeke described the stance as damaging to small enterprises.
Conversely, the Nigeria Employers’ Consultative Association (NECA) praised the decision, citing it as essential for consolidating macroeconomic stability.
Despite the criticism, the CBN maintains that its cautious approach is necessary given ongoing geopolitical tensions, external price shocks, and inflation volatility.
“We must remain vigilant and committed to our mandate,” Cardoso concluded. “Our path forward requires collaboration, discipline, and trust in the reforms we are implementing.”
The next MPC meeting is expected to further assess inflation trends, FX developments, and financial sector resilience as the CBN charts a steady course toward long-term economic stability.
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