MPC retains key rates as Cardoso projects continued disinflation

The Central Bank of Nigeria (CBN) on Tuesday retained its monetary policy rate at 27 per cent after the Monetary Policy Committee (MPC) concluded its meeting in Abuja, with Governor Olayemi Cardoso saying the decisions were taken to consolidate the progress already made in moderating inflation and stabilizing the financial system.

Cardoso told journalists that all 12 committee members were present and  the majority voted to keep the monetary policy rate unchanged while adjusting the standing facility corridor around the MPR to +50/-450 basis points. 

The MPC also resolved to maintain the cash reserve requirement for deposit money banks at 45 per cent, keep merchant banks’ CRR at 16 per cent, apply a 75 per cent CRR on non-TSA public sector deposits, and retain the liquidity ratio at 30 per cent.

He said the decisions were guided by the need “to sustain the progress made so far towards achieving low and stable inflation,” adding that the committee would continue to rely on a data-driven evaluation of economic conditions before taking further steps.

Cardoso said the MPC welcomed the continued slowdown in inflation for the seventh consecutive month in October 2025. According to him, the easing of inflationary pressure was supported by sustained monetary tightening, a stable exchange rate, increased capital inflows, and a surplus in the current account balance. He added that relative stability in the price of Premium Motor Spirit (PMS) and improved food supply also contributed to the pace of disinflation.

However, he cautioned that inflation remained high. “Headline inflation is still in double digits, and that requires sustained efforts to moderate it further,” he said. The committee, he noted, agreed that the decline across headline, core and food inflation suggested that the lagged effect of existing policy measures would continue to impact the economy favourably in the months ahead.

Cardoso explained that keeping policy parameters unchanged at this time was necessary to ensure that previous rate hikes transmit effectively to the real economy. “Maintaining the current stance of policy, amidst lingering global uncertainties, would allow the effect of previous policy rate hikes to sufficiently transmit to the real economy and further reduce prices,” he said.

He also spoke about the external sector, noting that members of the committee acknowledged “the robust performance of the external sector, evidenced by the surplus current account balance and steady accretion to reserves, which have contributed to stability in the exchange rate and moderation in inflation.” According to him, the recent upgrade of Nigeria’s sovereign credit rating and the country’s removal from the FATF grey list were outcomes of the strong cooperation between fiscal and monetary authorities.

Turning to Nigeria’s $46.7 billion external reserves, the governor said the country was in a favourable position. “On reserve adequacy, we currently have about 10 months of import cover, which is a very good position. In fact, the underlying strength is even greater, as there is significant liquidity within the market that may not be immediately obvious.”

He linked the boost in reserves to rising non-oil exports, improved oil production, higher remittances, and increasing portfolio investment. “A more competitive currency encourages exports, and we are seeing this especially in non-oil exports. Oil production has also improved compared with where we were previously,” he said.

“International remittances have risen as well. The important thing is that reserves are being built in a systemic and sustainable way. Portfolio investors are returning because reforms have made Nigeria more attractive, and the market is now more open and transparent.”

Cardoso noted that broader economic conditions were improving after a turbulent period. “The macro indicators are looking a lot better, and inflation has come down steadily. This time last year it was over 34 percent, and now we are around 16 percent,” he said.

He described the return to stability as a turning point for long-term growth. “A year and a half or two years ago, there was a lot of instability in our markets. When markets are unstable, investors who would normally invest stay away. Now we have moved from instability to stability. After stability comes investment, and after investment comes growth.”

Advertisement

According to him, recent GDP figures signal that growth momentum is returning. “If you look closely, you will see that growth has returned over the last couple of quarters. With stability now achieved, investor confidence rises, investment follows, and the issues you mentioned become easier to address.”