CBN retains tight policy, keeps interest rate at 27.50%

By Kazeem Ugbodaga

The Central Bank of Nigeria (CBN) announced today that its Monetary Policy Committee (MPC) has unanimously decided to maintain the current monetary policy framework, opting to retain the Monetary Policy Rate (MPR) at 27.50%.

The decision, revealed during a press briefing, underscores the CBN’s cautious approach amid ongoing economic challenges, including inflationary pressures and currency volatility.

In addition to retaining the MPR, the MPC voted to keep the Cash Reserve Ratio (CRR) unchanged at 50% for Deposit Money Banks and 16% for Merchant Banks.

The Liquidity Ratio (LR) remains steady at 30%, while the Asymmetric Corridor around the MPR was also maintained at +500/-100 basis points.

These measures reflect the CBN’s commitment to balancing economic growth with efforts to stabilize the naira and control inflation.

The decision to hold rates steady comes as Nigeria grapples with a complex economic landscape.

Inflation has remained elevated, driven by rising food and energy costs, while the naira continues to face depreciation pressures in both official and parallel markets.

The MPC’s stance signals a focus on maintaining tight monetary conditions to curb inflationary trends while fostering an environment conducive to sustainable growth.

Analysts suggest that the CBN’s decision aligns with its broader strategy to prioritize price stability and bolster investor confidence.

By retaining high reserve ratios and a robust MPR, the bank aims to limit excess liquidity in the financial system, which could exacerbate inflation.

However, some economists caution that sustained high interest rates may dampen credit access for businesses, potentially slowing economic activity in key sectors.