The Central Bank of Nigeria (CBN) and its Monetary Policy Committee (MPC) have made strategic decisions to stabilize the naira and curb inflation, marking a pivotal shift in Nigeria’s macroeconomic management. At the 299th MPC meeting on February 19 and 20, 2025, the Committee opted to hold the Monetary Policy Rate (MPR) at 27.5%, demonstrating its commitment to controlling inflation while maintaining exchange rate stability.
CBN Governor, Olayemi Cardoso, confirmed that the decision was unanimous, highlighting key policy actions:
- MPR remains at 27.5%.
- Asymmetric corridor around the MPR is retained at +500/-100 basis points.
- The Cash Reserve Ratio (CRR) for Deposit Money Banks is held at 50%, while Merchant Banks’ CRR stays at 16%.
- Liquidity ratio is maintained at 30%.
This marks a pause in the string of rate hikes from 2024, with the CBN focusing on inflation control, foreign exchange stability, and economic growth.
One of the most significant outcomes of recent CBN policies is the stabilisation of the naira. After depreciating sharply in 2024, the naira has seen signs of recovery, driven by increased liquidity and enhanced transparency in the foreign exchange market. The exchange rate between the official and parallel markets has narrowed, bringing more stability.
As of February 20, 2025, the naira appreciated by 6.95% in the parallel market, improving from N1,640/$ to around N1,510/$. This narrowing gap between the official and parallel market rates is a sign of increasing market confidence.
The introduction of the Electronic Foreign Exchange Matching System and the Nigerian Foreign Exchange Market FX Code has further boosted liquidity and reduced volatility, making the market more transparent and efficient.
Inflation remains a pressing concern, with Nigeria’s annual inflation rate at 24.48% in January 2025. Despite the monetary tightening, inflation remains high, but the CBN is focused on achieving single-digit inflation in the medium to long term. The retention of the MPR at 27.5% indicates the continuation of tight monetary policy to control inflationary pressures.
Inflation is expected to reduce to around 15% by the end of 2025, with the hope that monetary easing may follow once inflation trends downward.
The CBN’s approach has garnered support from key economic bodies. Dr. Muda Yusuf, CEO of the Centre for the Promotion of Private Enterprise (CPPE), emphasized that maintaining current rates is a prudent decision to avoid exacerbating pressures on businesses. Similarly, the Nigerian Employers’ Consultative Association (NECA) praised the CBN for introducing the FX Code, which aligns with its push for enhanced transparency in the market.
The CBN has also received commendations for its efforts to clear a $7bn FX backlog, reinforcing investor confidence. These interventions signal a path toward a more flexible and resilient exchange rate regime.
While controlling inflation and stabilizing the naira are at the forefront of CBN’s objectives, the Bank is also focusing on banking sector reforms. In March 2026, new minimum capital requirements will be implemented for banks to bolster the financial system’s resilience. The success of these reforms will depend on careful execution and effective capital injections into the banking sector.
CBN’s policies have already attracted foreign investment, with Nigeria re-entering the Eurobond market in late 2024 and securing over $9bn in subscriptions.
The need for closer fiscal and monetary policy coordination has emerged as a theme. Cardoso emphasized that synergy between fiscal and monetary authorities is critical for long-term economic stability. Specific focus must be placed on managing food inflation, which continues to drive up overall prices.
Financial analysts have underscored the importance of aligning monetary and fiscal policies to avoid counteracting each other. Effective collaboration could help stabilize the economy, ensuring that Nigeria navigates through its economic recovery without fueling further inflation.
The CBN’s decision to hold the MPR and continue with forex market reforms reflects a cautious but strategic approach to Nigeria’s economic recovery. These measures are designed to stabilize the naira, control inflation, and build investor confidence. If these policies continue to be implemented effectively, Nigeria could achieve sustained macroeconomic stability, setting the stage for future growth.