Central Bank of Nigeria Holds Interest Rate Steady at 27.5%

 The Central Bank of Nigeria (CBN) announced on July 22, 2025, its decision to maintain the Monetary Policy Rate (MPR) at 27.5%, following a meeting of the Monetary Policy Committee chaired by Governor Olayemi Cardoso. 

The decision reflects the bank’s strategy to combat persistent inflation, which stood at 33.4% in June 2025, driven by a 10% naira depreciation in the second quarter and a 15% surge in food prices. The CBN also retained the cash reserve ratio at 45% and the liquidity ratio at 30%, signaling a cautious approach to stabilizing the economy amid global oil market volatility and domestic fiscal pressures.

Cardoso emphasized that the high rate aims to anchor inflation expectations and curb excessive demand, with a target to reduce it to 21% by year-end, though analysts project a more modest 28% based on current trends. Businesses, particularly in manufacturing, have expressed concern, noting that loan interest rates have risen to 32%, deterring a 10% investment drop in Q2. 

The CBN’s stance contrasts with calls from the Manufacturers Association of Nigeria for a 2% cut to spur growth in a 2.5% GDP economy. The decision’s effectiveness remains uncertain, with the bank citing a $10 billion foreign reserve buffer, but critics highlight structural issues like oil theft, costing $1 billion annually, as unaddressed challenges, leaving the economic outlook cautiously balanced.

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