The Central Bank of Nigeria’s (CBN) decision to maintain the Monetary Policy Rate (MPR) at 27.50% is expected to sustain foreign exchange (FX) market stability and further reduce inflation, according to financial analysts. The Monetary Policy Committee (MPC), meeting on July 21-22 in Abuja, also retained the asymmetric corridor at +500/-100 basis points, the Cash Reserve Ratio at 50% for deposit money banks and 16% for merchant banks, and the Liquidity Ratio at 30%.
The MPC’s decision, aimed at curbing inflationary pressures, comes as Nigeria’s inflation rate fell to 22.22% in June, marking its third consecutive decline, driven by stable FX markets and steady energy prices. The CBN noted that maintaining current rates would help manage price pressures while fostering economic stability. The naira appreciated slightly by 0.15% last week, reaching N1,534.72 per dollar in the official Nigerian Autonomous Foreign Exchange Market, with a 1% gain over the past month. The gap between official and parallel market rates has also narrowed, with the dollar trading at N1,530 on the black market, per abokifx.com.
Analysts from Afrinvest predict that macroeconomic trends will guide future MPC decisions, while Meristem Securities expects the steady rates to support real sector growth by ensuring a predictable FX environment, boosting business activities. They also anticipate sustained investor interest in equities, driven by strong earnings expectations, and stable participation in fixed-income markets, despite a potential softening of interest rates due to improved liquidity. Last week, the Open Buy Back rate fell 5.83% to 26.50%, and the overnight rate dropped 5.75% to 26.92%, reflecting enhanced financial sector liquidity.
Nigeria’s external reserves rose to $38.63 billion as of July 24, up from $20 billion two years ago, despite increased CBN interventions and weak oil receipts. CBN Governor Olayemi Cardoso highlighted this as a sign of growing investor confidence. Initiatives like new International Money Transfer Operator licenses and a willing buyer-willing seller FX model have boosted diaspora remittances, estimated at $23 billion annually, and supported dollar inflows. Foreign portfolio investments surged 315% to $2.73 billion in June, the highest since March 2019.
Taiwo Oyedele, Chairman of the Presidential Fiscal Policy and Tax Reforms Committee, emphasized the need for better government coordination to address high interest rates and job creation challenges. Meanwhile, Nigeria’s GDP grew 3.13% year-on-year in Q1 2025 to N49.34 trillion, and the balance of payments recorded a $6.83 billion surplus in 2024. Analysts from Cordros Securities project continued inflation declines, supported by stable naira and low global oil prices, positioning Nigeria for sustained economic growth.
