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The Monetary Policy Committee (MPC) of the Central Bank of Nigeria (CBN) went against market consensus and retained its Monetary Policy Rate (MPR) at 27.00%.
The MPC’s decision to maintain the current monetary stance and defying market consensus, is likely based on balancing two core, and often conflicting, mandates: combating inflation by maintaining naira stability versus supporting economic growth.
Why the CBN Chose to Hold the Rate
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Although headline inflation has moderated significantly (falling to 16.05% in October 2025 from a peak), it remains well above the CBN’s target band of 6% to 9%. The Committee likely judged that a pause was necessary to ensure the disinflationary trend is firmly established and not just a temporary factor (like the seasonal harvest).
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FX Stability Risk: The CBN has maintained relatively high interest rates to attract Foreign Portfolio Investment (FPI) and support the Naira. Cutting the rate, even modestly, could have reversed these capital flows, putting renewed pressure on the Naira and the external reserves. The Committee prioritised exchange rate stability over a slight easing of credit costs.
The naira recorded a negative trading performance during the week as the naira weakened by 0.99 per cent at the official Nigerian Foreign Exchange Market to 1,456.72/$ as of Friday, from 1,442.43/$ in the previous week. At the parallel market, the currency traded weaker within the range of 1,470/$ and 1,475/$. The naira trades at a less than 2% differential between the official and parallel market a convergence that has been positive for stability.
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Cautious Momentum: The MPC cut the rate by 50 basis points to 27.00% in September 2025—the first cut in years. By holding in the subsequent meeting, the CBN demonstrates that it is not committed to a prolonged easing cycle and is willing to stop and assess the full impact of the first cut before making another move.
“The committee’s decision was underpinned by the need to sustain the progress made so far towards achieving stable inflation,” Governor Olayemi Cardoso told a press conference in Abuja, the capital.
Cardoso welcomed the decline in price pressures, which he said reflected the impact of sustained tight monetary policy, a stable exchange rate and increased capital flows.
He said the MPC will rely on its data-driven assessment of developments and outlook to guide future policy decisions.
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