CBN Holds MPR to Consolidate Disinflation Gains Amid Strengthening Economy

The Central Bank of Nigeria’s Monetary Policy Committee (MPC), at its 303rd meeting held on November 24–25, 2025, opted to retain its tight monetary policy stance, signalling caution despite notable improvements across key macroeconomic indicators. The decision to keep the Monetary Policy Rate (MPR) unchanged at 27.0% reflects the MPC’s resolve to consolidate the steady deceleration in inflation and maintain stability in the financial system.

Why the CBN Is Maintaining the Tight Stance

The MPC’s decision was anchored on the need to allow previous interest rate hikes to continue transmitting their full effects across the economy. With inflation easing for the seventh consecutive month—dropping to 16.05% in October 2025—the Committee believes a premature easing of rates could reverse the gains made so far.

The slowdown in both core and food inflation, driven by stable exchange rates, improved food supply and sustained monetary tightening, provides evidence that past policy actions are working. However, inflation remains well above the CBN’s ideal range, making caution necessary.

Banking System Stability at the Forefront

Notably, the Communiqué highlighted the resilience of Nigeria’s banking industry, particularly in response to the ongoing recapitalization exercise. With 16 banks now fully meeting the revised capital requirements, the MPC expressed confidence in the sector’s stability. This progress is critical as the country aims to deepen financial intermediation and strengthen banks’ shock-absorption capacity.

By retaining the CRR and Liquidity Ratio at existing levels, the CBN signalled its preference for maintaining regulatory stability, ensuring banks maintain sufficient liquidity buffers while supporting lending activities.

External Sector Fundamentals Strengthen

Nigeria’s external reserves experienced significant growth, rising to US$46.70 billion in mid-November—a 9.19% increase from September levels. This accretion, alongside a current account surplus and stable foreign exchange market, has contributed to moderating inflationary pressures and boosting investor confidence.

The sovereign credit rating upgrades and Nigeria’s removal from the FATF grey list further point to improving governance, transparency, and risk management in the financial system. These developments are likely to attract fresh capital inflows and support exchange rate stability.

Growth Momentum Strengthening

On the growth front, the economy maintains an upward trajectory. Real GDP expanded by 4.23% in Q2 2025, up from 3.13% in Q1. Additionally, the Purchasing Managers’ Index (PMI) jumped to 56.4 points in November, the highest in five years—indicating robust expansion in business activity.

These positive signals suggest that Nigeria is entering a phase of strengthened economic activity, supported by policy coherence between fiscal and monetary authorities.

Global Context Also Influencing Decision

The MPC’s cautious optimism is also tied to global economic conditions. While global output is expected to recover, risks such as geo-economic tensions, protectionist policies and supply chain uncertainties persist. The CBN’s strategy appears to be one of insulating the domestic economy from external shocks while capitalizing on global stability gains.

Outlook: Disinflation Expected to Continue

Looking ahead, the MPC projects sustained cooling of inflation, driven by the lagged effects of earlier policy tightening, stable exchange rates and improved food supply from the ongoing harvest cycle. However, the Committee made it clear that its stance will remain data-driven—leaving the door open for adjustments should risks materialize.

Conclusion

Overall, the CBN’s decision to hold the MPR at 27% reflects a balancing act between containing inflation, safeguarding financial stability and supporting economic recovery. With improving macroeconomic fundamentals and a more resilient banking sector, Nigeria appears to be on a steady path toward price stability and long-term growth—provided current policy discipline is maintained.

The next MPC meeting scheduled for February 23–24, 2026, will offer a clearer picture of how these dynamics evolve.