Economists have expressed mixed reactions on the Central Bank of Nigeria’s (CBN) Monetary Policy Committee (MPC) decision to maintain all rates with the headline Monetary Policy Rate (MPR) held at 27.5 per cent, with some viewing it as a step toward monetary stability and economic growth......CONTINUE READING THE ARTICLE FROM THE SOURCE>>>>>
Others argue that the decision is risky due to potential external shocks and excessive public spending, emphasizing the need for continued monetary tightening to curb inflation and maintain stability.
Some analysts believe the move was expected, given the recent decline in inflation and treasury bill yields, but caution that any adjustments to monetary policy should be gradual to prevent disruptions in capital flows and market stability.
The Central Bank of Nigeria’s Monetary Policy Committee voted to hold all rates across board with the headline monetary policy rate (MPR) held at 27.5 per cent citing improvement in economic indices.
This was announced by the central bank governor, Yemi Cardoso, at the press briefing of the monetary policy committee on Thursday.
The Managing Director of Highcap Securities Limited, Mr. David Adonri expressed concerns over the decision of the Central Bank of Nigeria’s (CBN) Monetary Policy Committee (MPC) to maintain all monetary rates, including the Monetary Policy Rate (MPR) at 27.5 per cent.
Speaking exclusively to THE WHISTLER, Adonri described the move as risky, citing potential external shocks and the impact of excessive public spending driven by the Federal Government’s large deficit budget. He argued that monetary policy should be proactively tightened to mitigate these threats.
“The MPC’s decision to hold all rates poses a significant risk because of the looming external shocks and the excessive public expenditure that will arise from the Federal Government’s deficit financing,” Adonri stated.
“Monetary policy ought to proactively address these concerns by continuing with a tightening approach,” he added.
He also questioned the credibility of the inflation slowdown cited as a basis for the MPC’s decision, suggesting that the methodology used by the National Bureau of Statistics (NBS) in rebasing inflation data does not accurately reflect economic realities.
“The supposed deceleration of inflation, which influenced the MPC’s decision, may be misleading because the weightings applied by the NBS during the rebasing exercise do not align with the current economic situation,” he added.
Adonri further noted that by maintaining rates, the monetary authorities may be acknowledging that short-term demand management policies have lost their effectiveness. He emphasized the need for fiscal policy measures to address the persistent inflationary pressures by closing the supply gap in the economy.
“In keeping rates unchanged, the monetary authorities may be realizing that short-term demand management strategies have been exhausted. The time has come for fiscal policy to step up and take responsibility for bridging the supply deficit that continues to fuel inflation,” he concluded.
The Head of Research and Investment at FSL Securities Limited, Mr. Victor Chiazor, stated that the decision by the Central Bank of Nigeria’s (CBN) Monetary Policy Committee (MPC) to maintain all policy parameters was expected, given recent trends in the financial markets and inflation data.
According to Chiazor, the decline in treasury bill stopped rates since January 5, 2025, coupled with a significant drop in inflation—falling from 34.80 per cent in December 2024 to 24.48 per cent in January 2025 following the rebasing exercise—made it logical for the MPC to hold rates and observe the economy’s response before making further adjustments.
“The decision to maintain the status quo on all CBN MPC policy parameters does not come as a surprise.
“With the downward trend in treasury bill yields and the inflation rate dropping significantly due to the rebasing exercise, it was only natural for the committee to pause and assess the economic impact of these changes,” Chiazor stated.
He cautioned that a premature reduction in the Monetary Policy Rate (MPR) could create panic in the financial system, which might undermine price stability.
“A sudden drop in the MPR could trigger uncertainty in the market, which would be detrimental to price stability,” he noted.
Chiazor also addressed ongoing calls for monetary easing but emphasized the need for a cautious approach to avoid disrupting capital flows and financial market stability.
“Despite growing calls for policy easing, we do not expect drastic adjustments to monetary policy parameters. A hasty shift could negatively impact capital flows, so any adjustments must be made gradually to prevent market distortions,” he concluded.
The First Professor of Capital Market, Professor Uche Uwaleke, also described the decision of the Central Bank of Nigeria’s (CBN) Monetary Policy Committee (MPC) to maintain all rates, including the Monetary Policy Rate (MPR) at 27.5 per cent, as a positive development for the economy.
Speaking on the outcome of the MPC meeting, Uwaleke stated that the decision marks the end of an era of aggressive policy rate hikes, particularly in light of the rebased Consumer Price Index (CPI) and a stable exchange rate. He emphasized that the move brings much-needed stability to monetary policy, which is crucial for business planning and household financial decisions.
“It is a good decision by the MPC,” Uwaleke remarked. “It signals the end of aggressive interest rate hikes and reflects the impact of the rebased Consumer Price Index and a stable exchange rate. More importantly, it introduces stability in monetary policy, which is essential for firms and households to plan effectively.”
Looking ahead, the professor projected that 2025 would likely witness a lower interest rate environment and a shift towards a more pro-growth monetary policy stance.
“With this decision coming at the start of the year, 2025 is expected to experience relatively low interest rates and a monetary policy approach that supports economic growth,” he added.
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