By Ademola Bakare
The monetary policy committee of the Central Bank of Nigeria {CBN} rose from its 299th meeting, held between February 19-20, 2025, in Abuja, and took some far-reaching decisions on the economy. Among other things considered within the macroeconomic and financial milieu, having assessed some associated risks to the 2025 economic outlook, was to maintain all monetary parameters.
Monetary Policy Rate {MPR} at 27.5%, retaining the asymmetric corridor around the MPR at +500/-100 basis points, Cash Reserve Ratio for Deposit Money Banks at 50.00 per cent, and Merchant Banks at 16 per cent. The body also retain the Liquidity Ratio at 30.00 per cent.
The CBN governor, Olayemi Cardoso, announced the decision of the Committee after its two-day meeting. The Committee, he noted, took the decision after a satisfactory assessment of recent macroeconomic and financial developments, and a very careful study of associated risk to the 2025 economic outlook that are expected to positively impact price dynamics in the near to medium term.
This includes stability in the foreign exchange market, and appreciation of the Naira exchange rate.
Tackling Inflation has been a perennial battle no government in the country has won over the years due to some structural defects in the economy. Until the recent rebasing of the consumer price index {CPI} by the National Bureau of Statistics {NBS}, inflation rate was 34.80% which it downed to 24.48% in January 2025.
Market watchers were however divergent on its implication on the economy. Some said it will provide more accurate inflation measures, help in formulating monetary decisions, as well as help the government in its fiscal planning. Other analysts were not that optimistic. They believe it will cause dislocation in data collation, and make it difficult to compare inflation rates over time, as it may affect the central bank’s ability to meet inflation targeting objective. They argued that it may impact contracts and agreements that are indexed on CPI, and may also heighten poverty, and inequality.
However, the rebased CPI figures will in no small measure aid the Central Bank of Nigeria’s reform. Particularly in retooling the economy with its ongoing policies, assist the government in aligning its programmes, as well as help both authorities in aligning Nigeria’s inflation metrics with global standard, and boost investors’ confidence.
Exchange Rate Management
The Committee commended the CBN for the effectiveness of its reforms which has improved the exchange rate stability. It specifically noted the convergence of rates between the Nigeria Foreign Exchange Market (NFEM) and the Bureau de Change (BDC), attributing it to the recently established Electronic Foreign Exchange Matching System (B-Match) and the Nigeria Foreign Exchange Code.
Foreign Direct Investment/Diaspora Remittances
The body urged the CBN not to relent on its policy measures initiatives that have enhanced transparency, ethics, and credibility in the market. It urged more collaboration with the fiscal authorities to engender greater inflow of foreign direct and portfolio investments, as well as diaspora remittances expected to increase as investor and stakeholder confidence improves.
Banking Sector: Among major highlights of the Committee’s consideration was the banking sector that has remained robust and resilient. It urged the CBN not to relent on its surveillance of the sector, especially on the ongoing recapitalization of the banking system to ensure the injection of quality capital as envisaged in the framework for a-$1trillion economy.
Conclusion
Inflation may have moderated based on the rebased CPI, however, the CBN has once again acknowledged the potency its various policy tools, deployed to anchor inflation at single digit rate. The governor has pledged not to relent until the objective is achieved.
Cardoso said “the CBN will deploy every possible orthodox strategy to tame inflation”. CBN’s economic outlook for 2025 is positive, but cautious, emphasizing the need for prudent monetary policy and collaboration between authorities to navigate global economic risks.
*Ademola Bakare, Media Consultant, writes from Abuja
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