CBN holds benchmark rate steady in disinflation phase

Governor of the Central Bank of Nigeria, Olayemi Cardoso | Credit: CBN

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The Central Bank of Nigeria has again held the Monetary Policy Rate at 27 per cent, marking the fourth pause this year as it prioritises stability amid a slowing but still elevated inflation cycle. With disinflation gaining ground, firmer reserves and a steadier exchange rate, the MPC opted for caution, allowing earlier tightening measures to filter through before considering an easing phase, SAMI TUNJI reports

The Central Bank of Nigeria has maintained its monetary policy rate at 27 per cent, reinforcing a cautious stance amid persistent but moderating inflation. The November 2025 decision by the Monetary Policy Committee came amid signs of disinflation, foreign reserve accretion, and relative exchange rate stability. Yet, the committee opted to hold the rate steady, signalling a preference to watch the lagged effects of previous rate hikes play out entirely rather than rush into an easing cycle.

The CBN justified this decision on the basis that headline inflation, although on a downward trend, remains in double digits at 16.05 per cent as of October. The bank noted that core and food inflation have also slowed, reflecting tight monetary conditions and improved food supply. Speaking at a post-MPC press briefing in Abuja, the CBN Governor, Olayemi Cardoso, argued that monetary stability is not an end but a prerequisite for sustainable growth. “After stability comes investment, and after investment comes growth,” he said, reinforcing the notion that policy consistency and market confidence remain the CBN’s priorities.

The Committee also adjusted the asymmetric corridor around the MPR to +50/-450 basis points, a technical signal intended to manage short-term liquidity while keeping a lid on inflation expectations. The liquidity ratio was maintained at 30 per cent, while cash reserve ratios for commercial banks, merchant banks, and non-TSA public deposits were retained at their existing levels. These measures show the Bank’s resolve to continue sterilising excess liquidity without disrupting financial intermediation.

While headline inflation has eased, according to data from the National Bureau of Statistics, the cost of housing and other core expenditure items remains elevated for households, especially in urban centres. Many Nigerians continue to grapple with high living costs, with limited signs of relief in their day-to-day experiences.

Speaking earlier at the Seminar for Finance Correspondents and Business Editors in Lagos, the CBN Deputy Governor, Corporate Services, Ms Emem Usoro, said that despite recent gains in stabilising the economy, more work is required to strengthen macroeconomic fundamentals and improve the living standards of Nigerians. In a keynote address delivered on her behalf by the Acting Director of the Corporate Communications Unit, Mrs Hakama Sidi-Ali, she stressed that the progress recorded so far was not sufficient to significantly improve living standards. “While progress has been made, more work is required to improve macroeconomic fundamentals and the standard of living for Nigerians,” she said.

Reserves rise, FX market steadies, but inflation risks persist

Macroeconomic stability indicators also underpinned the CBN’s decision. Gross external reserves rose to $46.7bn in mid-November 2025, the highest in about seven years, representing a 9.2 per cent increase from September and offering import cover for 10.3 months. This buffer, according to Cardoso, is not just a headline statistic but a reflection of a more transparent, market-driven FX system that now averages $500m in daily turnover without frequent CBN intervention.

The narrowing gap between the official and parallel market exchange rates, now reportedly less than 2 per cent, has boosted confidence in the CBN’s managed float regime. The Governor attributed the stability to reforms in the FX market, improved oil and non-oil exports, increased remittance inflows, and the resumption of portfolio investment. He highlighted the role of the willing-buyer, willing-seller framework, the FX Monitoring and Surveillance system, and the absence of policy flip-flops as crucial to regaining investor trust. The improved external position is further aided by Nigeria’s removal from the FATF grey list and a recent sovereign credit upgrade by global ratings agencies.

However, despite these gains, inflation risks remain. Global commodity prices, geopolitical tensions, domestic food supply shocks and rising money supply could still derail the disinflation trend. The PUNCH earlier reported that Nigeria’s broad money supply rose to N119.04tn in October 2025 from N117.78tn in September. The increase amounted to N1.25tn, equivalent to 1.06 per cent, reflecting a continued build-up of liquidity in the financial system despite a tight monetary environment. The rise in October followed the MPC’s decision in September 2025 to cut the Monetary Policy Rate by 50 basis points to 27 per cent, the first rate reduction since 2020. A significant driver of the increase in M3 was a jump in net domestic assets. NDA rose to N84.23tn in October from N76.12tn in September, a difference of N8.11tn, or 10.65 per cent, within one month. The rise reflects a surge in domestic credit conditions, including higher government borrowing and increased banking system claims on the private sector. The October figures show that the major push to liquidity came from the domestic side of the economy rather than from foreign inflows, and this could derail disinflation gains.

However, at its November meeting, the MPC left the benchmark rate unchanged at 27 per cent and adjusted the policy corridor to prevent banks from warehousing liquidity at the apex bank, signalling a cautious approach to balancing easing with inflation control. The CBN believes that keeping rates unchanged will help anchor expectations while allowing earlier tightening measures to filter through.

Upholding orthodox monetary policy

Another key theme from the meeting was the CBN’s shift away from unorthodox monetary interventions towards a more conventional policy approach. Cardoso confirmed that the Bank has rolled back N2tn in outstanding intervention loans, bringing the cumulative total to N10.9tn issued over the past decade. However, N4.69tn remains unrecovered, posing a significant constraint on further fiscal-type interventions.

The Governor described the intervention era as a distortionary phase that crowded out private sector capital and undermined the discipline of credit markets. “We have no choice,” he said when asked about the shift. “Our hands are tied. But we are not resting. We are using our convening power to attract real development finance institutions to play their role.”

The recapitalisation of the banking sector is another pillar of the Bank’s current strategy. Sixteen banks have so far complied with new capital thresholds, and the CBN is closely monitoring the trajectory of others. The recap effort aims to build stronger buffers for systemic stability and ensure that Nigerian banks can support domestic and international economic growth.

Cardoso reiterated that trust, respect, and confidence were now the guiding values of the Central Bank. He argued that a predictable policy environment is more critical than a flurry of short-term measures. “Confidence doesn’t come without trust or respect. It comes from being transparent, open, honest, and consistent,” he said.

CBN targets inflation anchoring amid mixed reactions

The CBN has signalled that it will maintain its orthodox policy stance and pursue inflation targeting in closer coordination with the fiscal authorities. Cardoso disclosed that the Permanent Secretary of the Federal Ministry of Finance now sits permanently on the MPC, ensuring closer collaboration in policy design and execution.

Also, the CBN is more focused on anchoring inflation expectations and allowing the market to function without frequent direct interventions. Cardoso acknowledged that the era of multiple windows, opaque allocation, and administrative rationing is over. Instead, the apex bank wants a disciplined, rules-based environment where the currency, credit and capital move freely but transparently.

Following the MPC’s decision to hold rates, economic experts and members of the Organised Private Sector commended the decision but urged the CBN to consider reducing it.

Reacting to the MPC decision, the Chief Executive Officer of Arthur Stevens Asset Management Limited, Olatunde Amolegbe, said the committee’s stance reflected caution despite the recent gains in inflation and exchange-rate stability.

Amolegbe said he had anticipated a slight easing. “I had expected a rate cut, to be honest, but I think the MPC chose to be extra cautious by giving itself time to see if the gains from the slowdown in inflation, as well as FX stability, are sustainable,” he explained.

He noted that consumption typically rises during the end-of-year period, which could introduce temporary price pressures.

“Given that we are also going into the holiday season when consumption is expected to spike, this will appear to be a reason,” he said, adding that the committee may also be watching the potential impact of rising insecurity on food prices.

The President of the Lagos Chamber of Commerce and Industry, Gabriel Idahosa, earlier said the MPC decision aligned with the current economic climate. Idahosa added, “We hope that going forward, the rate will be reduced. They still have their eye on that.

The target to slow down inflation to 15 per cent by December is also a factor, and they have almost reached their goal.”

He also said that the CBN appeared focused on sustaining investor confidence in Nigeria’s markets.

The Chief Executive Officer of the Centre for the Promotion of Private Enterprise, Dr Muda Yusuf, said the CBN’s move was cautionary. He said, “The Central Bank of Nigeria’s decision to retain the Monetary Policy Rate is seen as a cautious move, given the uncertainties in the global economy. Despite positive indicators, the bank is taking a wait-and-see approach.

“There’s some comfort in the adjusted asymmetric corridor, which now stands at +50 basis points and -450 basis points. This means banks have a short-term incentive to lend at lower rates and are discouraged from bringing funds to the central bank. The government should, however, address structural issues driving inflation.”

Meanwhile, the Director-General of the Nigerian Association of Small and Medium Enterprises, Eke Ubiji, earlier argued that the MPC needed to reconsider the rate in light of the sustained decline in inflation. He insisted that the conditions for borrowing remained harsh for Micro, Small, and Medium-sized Enterprises despite improvements in macroeconomic indices.

Ubiji said, “The CBN needs to still go around their decision on the MPR and see what could be done. It is still not encouraging borrowing from the private sector.” Questioning the disconnect between decreasing inflation and a stagnant interest rate, he said, “Something is wrong somewhere. There’s no correlation. If inflation is decreasing every month but the interest rate remains unchanged, then something is wrong somewhere. If the interest rate is at 27 per cent, then what is the cost of borrowing?”

He added that although development funds were available, the high cost of accessing them undermined their impact. Also, the Manufacturers Association of Nigeria called on the CBN to further reduce interest rates, warning that the high cost of borrowing continues to hinder production and weaken competitiveness in the real sector.

“While the emphasis on exchange rate stability and improved forex liquidity is crucial, it is essential to reduce the cost of funds to encourage borrowing for expansion and investment,” MAN’s Director-General, Segun Ajayi-Kadir, said in a statement.

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