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The Governor of the Central Bank of Nigeria (CBN), Olayemi Cardoso, and other Monetary Policy Committee (MPC) members have indicated that reducing the benchmark interest rate would have been premature at the September meeting, given the inflationary risks still present in the economy.
According to personal statements from MPC members published on the CBN website, the governor and several committee members voiced concerns over a potential reversal in the recent downward trend in inflation. At the September meeting, the MPC increased the Monetary Policy Rate (MPR) by 50 basis points to 27.25% from 26.75%, adjusted the asymmetric corridor around the MPR to +500/-100 basis points, raised the cash reserve ratio of deposit money banks by 500 basis points to 50%, and merchant banks by 200 basis points to 16%. The liquidity ratio was maintained at 30%.
Governor Cardoso explained, “There is a general sentiment that the Committee should consider holding or loosening the policy rate due to recent declines in headline inflation and the perceived negative impact of tight monetary policy on Nigeria’s economic recovery and well-being. However, in my judgment, this would be premature. Although previous rate hikes have helped curb inflation, the balance of risks suggests that these gains could reverse if we don’t maintain a tight stance.”
He also noted the global trend towards moderate or positive economic outlooks, with expectations of policy rate reductions in advanced economies. “While this is encouraging for capital flows in emerging markets, we must prioritize real returns on investments. Consequently, Nigeria should continue implementing reforms to remain competitive among emerging markets and focus on policies that will enable positive real interest rates in the near future.”
Cardoso emphasized that the MPC would continue monitoring both global and domestic economic trends to ensure that policies are data-driven and that inflation expectations remain anchored. He added that the MPC’s previous aggressive rate hikes had shown results in curbing inflation, and without such measures, inflation could have accelerated significantly.
CBN Deputy Governor of Financial System Stability, Philip Ikeazor, also voiced caution, noting that while domestic inflation is easing, especially food inflation, it has not yet reached levels warranting a policy hold or rate cut. He stated, “Although food inflation pressures are gradually easing, challenges like climate change, energy pricing adjustments, and currency stability continue to present risks. Therefore, it’s too early to end the tightening cycle, as current stability is not yet fully secure.”
MPC member Murtala Sagagi echoed this sentiment, stressing that recent declines in inflation should be approached cautiously due to factors that could disrupt progress. “In response to potential economic shocks, the MPC agreed unanimously to further tighten, anticipating that coordinated efforts with fiscal policies would bolster confidence and support inclusive, sustainable growth.”
Another committee member, Muhammad Abdullahi, added, “With inflation control as a priority, the MPC needs to maintain a higher policy rate to keep inflation expectations well anchored, thus supporting the broader economic goals of the federal government. The current tight monetary stance remains crucial for domestic price stability.”
The International Monetary Fund (IMF), in its latest Global Financial Stability Report, supported these policy actions, noting that recent CBN measures have contributed to the naira’s stabilization. “Rate hikes and efforts to clear overdue foreign exchange obligations have helped the naira show more signs of stability,” the report stated, underscoring the importance of recent policy decisions in addressing economic challenges.
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