CBN’s MPC Leaves Key Policy Rates Unchanged in Its First Meeting of 2025
The Monetary Policy Committee (MPC) of the Central Bank of Nigeria (CBN) convened for its first meeting of the year on February 19–20, 2025, to evaluate recent economic and financial developments while assessing potential risks to the 2025 outlook. All 12 committee members were present for the deliberations.
After thorough discussions, the Central Bank of Nigeria (CBN) has decided to leave all parameters unchanged at its Monetary Policy Committee (MPC) meeting today. More importantly, the CBN governor’s remarks were somewhat dovish, suggesting that the central bank may consider easing its monetary policy in the second half of the year if inflation continues to decrease. Already, markets have started pricing in the possibility of a rate cut as treasury bill yields declined across all tenors yesterday.
The key decisions include:
- Monetary Policy Rate (MPR): Held steady at 27.50%.
- Asymmetric Corridor: Maintained at +500/-100 basis points around the MPR.
- Cash Reserve Ratio (CRR) for Deposit Money Banks: Retained at 50.0%.
- Cash Reserve Ratio (CRR) for Merchant Banks: Kept at 16.0%.
- Liquidity Ratio: Unchanged at 30.0%.
While a rate cut could ease financial pressures on individuals, businesses, and the government, it may also deter foreign portfolio investors, potentially leading to reduced foreign exchange (FX) inflows into the country. If this happens, it could dampen the positive impact of the recent improvements in the exchange rate, which have been supported by the CBN’s reforms.
The MPC’s decision reflects a cautious policy approach in response to prevailing economic conditions, ensuring financial system stability while monitoring inflationary pressures and growth dynamics.
On the positive side, there has been a noticeable decrease in FX demand, primarily due to reduced Premium Motor Spirit (PMS) imports. This trend is likely to continue, providing support to the Naira.