The Central Bank of Nigeria (CBN) jolted financial markets on Tuesday by keeping the Monetary Policy Rate (MPR) unchanged at 27%, alongside maintaining the liquidity ratio at 30% and high Cash Reserve Requirements across the banking sector. The move came as a surprise to analysts, most of whom had predicted a rate cut of up to 200 basis points.
Governor Yemi Cardoso and the Monetary Policy Committee (MPC) described the decision as a careful balance between consolidation and caution. The bank cited the fragile nature of recent economic gains, particularly in inflation, as the rationale for maintaining a firm stance.
“While headline, food, and core inflation are showing signs of slowing, the progress is not yet solid enough to risk a premature easing,” Cardoso said. He emphasized that sustaining low and stable inflation remains the CBN’s top priority.
October inflation data supported the MPC’s caution, reflecting a modest slowdown across key indicators. However, the committee warned that gains could reverse quickly if monetary conditions were loosened too soon.
In a subtle adjustment, the CBN trimmed the standing facility corridor by 200 basis points—reducing both the lending rate for banks and the deposit rate paid by the central bank. This move aims to ease liquidity pressures on banks without signaling a broader policy relaxation.
Beyond domestic considerations, global uncertainty factored heavily into the decision. Cardoso highlighted that lingering risks in international markets warrant caution rather than stimulus, suggesting that external pressures remain a significant concern for Nigeria’s economy.
Analysts described the CBN’s stance as a “strategic pause,” intended to consolidate monetary gains while monitoring both local inflation trends and global developments. The central bank signaled that future policy adjustments would remain data-driven, with stability and sustainability as guiding principles.
The announcement underscores a delicate balancing act: encouraging growth while preventing inflationary pressures from reversing recent gains, all amid a volatile global backdrop.
