Mariam Abeeb
As Nigeria navigates a delicate economic recovery amid global uncertainties, the Central Bank’s 303rd Monetary Policy Committee (MPC) meeting offered a clear signal: sustaining disinflation and macroeconomic stability remains the priority.
Mariam Abeeb examines the key drivers behind the Committee’s decisions.
The Central Bank of Nigeria (CBN) concluded its 303rd Monetary Policy Committee (MPC) meeting with a firm resolve to maintain monetary tightening as a tool to sustain macroeconomic stability, consolidate disinflation gains, and preserve improving foreign exchange conditions. The Committee opted to keep all key policy parameters unchanged.
Policy Decisions: A Continuation of Tight Monetary Stance
The MPC retained all monetary policy indicators, signalling confidence in ongoing policy outcomes and caution against premature easing.
Monetary Policy Rate (MPR): 27.50%, Cash Reserve Ratio (CRR): 45% (Commercial banks); 16% (Merchant banks), Liquidity Ratio: 30%, Standing Facilities Corridor: +50 / -450 basis points around the MPR
This stance, the Committee noted, is essential to anchor inflation expectations and ensure the gains of the past months are not reversed.
Key Drivers Behind the MPC’s Decision
Nigeria’s disinflation continued for the seventh consecutive month, with headline inflation easing to 16.05% in October 2025, a significant improvement from 34% a year earlier.
Food inflation slowed to 13.12%, driven by improved supply and naira stability and core inflation fell to 18.69%, reflecting softer household and furnishing costs.
Gross external reserves rose to $46.70 billion by mid-November, supported by rising oil output, higher exports, improved remittance flows and a more disciplined, market-reflective FX system
These developments have enhanced exchange rate stability and contributed to disinflation. Also, Nigeria’s removal from the FATF grey list, alongside a recent sovereign credit rating upgrade, has improved investor perception and is expected to stimulate higher capital inflows.
The CBN Governor, Olayemi Cardoso, reaffirmed progress in the banking recapitalisation programme, saying 16 banks have already met the revised capital requirements, signalling strong sector resilience and stability.
While the MPC defended its cautious posture, reactions from analysts and private-sector stakeholders were mixed.
According to the Central Bank, maintaining a tight stance remains critical to completing the disinflation cycle, especially with potential end-of-year demand pressures.
However, the Organised Private Sector (OPS) argued that a marginal rate cut could have supported businesses burdened by high borrowing costs.
But, the wide gap between inflation and MPR remains “economically distortive, ” yet others consider the pause prudent given lingering global uncertainties and domestic price risks.
Macroeconomic Indicators: Domestic Stability Strengthening
The MPC acknowledged progress but warned that inflation remains uncomfortably high and requires continued vigilance, though the real GDP grew 4.23% in Q2 2025 (year-on-year), up from 3.13% in Q1, reinforcing a steady growth trajectory.
The Purchasing Managers’ Index (PMI) surged to 56.4 points in November, a five-year high, indicating strong business sentiment.
At $46.70 billion, Nigeria’s reserves are now sufficient to cover 10.3 months of imports—an important buffer against external shocks.
Global Economic Context
Global economic output is expected to recover as trade negotiations improve and monetary conditions remain supportive in advanced economies, and geopolitical tensions ease.
However, the outlook remains clouded by rising protectionism, risks of U.S.–major partner trade disputes, and geo-economic fragmentation. Global inflation is projected to continue moderating through 2026 as the effects of past global monetary tightening persist.
CBN’s Forward Guidance: Disinflation to Continue
The MPC forecasts continued disinflation driven by the lagged impact of previous rate hikes, FX market stability and seasonal harvest-induced food supply improvements.
The Committee believes maintaining the current policy stance will allow tighter conditions to fully transmit into the real economy.
Stakeholder Reactions and Recommendations
Manufacturers Association of Nigeria (MAN) welcomed the pause in rate hikes but urged future rate cuts to ease high borrowing costs, stronger fiscal-monetary coordination, structural reforms to address insecurity and food supply disruptions
Conclusion
The 303rd MPC meeting underscores the CBN’s priority: price stability first, growth support second. While the private sector continues to push for lower lending costs, the Bank insists that easing too soon may jeopardise recent progress.
With improving macroeconomic indicators, rising reserves, and a stabilising currency, the CBN is betting that patience will deliver a more durable recovery.
