The Central Bank of Nigeria (CBN) has once again raised its Monetary Policy Rate (MPR), this time to 27.25%. The decision was announced during the latest Monetary Policy Committee (MPC) meeting, which took place on Tuesday under the leadership of the new CBN Governor, Yemi Cardoso.
Governor Cardoso explained that the decision is aimed at boosting economic confidence, which in turn would enable businesses and individuals to plan better for the medium to long term. He also emphasized that, despite this measure, further actions are still needed to fully achieve the bank’s mandate of price stability.
The MPC highlighted that while the overall inflation rate had shown a slight decline due to easing food inflation, core inflation—particularly driven by rising energy costs—remains high.
This continuing inflationary trend is a significant concern for the committee members, as it signals ongoing pressures on the economy. As a result, the MPC emphasized the importance of close cooperation with fiscal authorities to address the upward pressure caused by rising energy prices.
The committee also discussed the increasing money supply in the economy and acknowledged the need to control the excess liquidity in the system, as well as to address the rising demand for foreign exchange.
Governor Cardoso further pointed out that the MPC is worried about Nigeria’s growing fiscal deficit. However, he reassured that the federal government has committed not to rely on monetary financing through the “ways and means” method, which would involve borrowing directly from the central bank.
Additionally, Cardoso praised the federal government for its efforts in stabilizing food prices. He expressed optimism that the distribution of refined petroleum products from the Dangote Petroleum Refinery would help lower transportation costs and reduce food price pressures in the short to medium term.
This development is also expected to reduce the demand for foreign exchange required for the importation of refined petroleum products, which would have a positive impact on Nigeria’s external reserves and improve the overall balance of payments.
It is worth noting that the CBN had previously raised the MPR in July 2024 by 800 basis points, from 13% in May 2022 to 26.75%, in an effort to curb inflation.
