As Nigeria’s economy begins to show signs of easing inflation and currency stabilization, all eyes are on the Central Bank of Nigeria (CBN) as its Monetary Policy Committee (MPC) convenes for its 301st meeting in Abuja from July 21 to 22.
The MPC, which maintained the Monetary Policy Rate (MPR) at 27.5% in May, is under pressure to decide whether to uphold its current tight monetary stance or initiate a policy shift to support economic growth. Although macroeconomic indicators have improved, uncertainty still clouds the decision-making landscape.
Key drivers of recent economic relief include the narrowing exchange rate gap between official and parallel markets, a dip in petrol (PMS) prices, and a positive trade balance. These trends have contributed to disinflation signals, raising questions about the timing and scale of potential policy adjustments.
Despite this, the Committee previously warned that inflationary risks remain. A premature interest rate cut, they argue, could reverse gains made in stabilizing the naira, which has recently appreciated due to robust yields on Nigerian Open Market Operations (OMO) and active CBN interventions.
Analysts are divided over the likely policy direction. Afrinvest Securities Limited anticipates that the MPC will maintain its hawkish stance, citing food inflation, global economic headwinds, and uncertainty surrounding rebased GDP data for Q1 2025. The firm projects June inflation to ease to 22.2%, helped by naira strength and a favorable base effect from the previous year.
Conversely, Bismarck Rewane, Managing Director of Financial Derivatives Company (FDC), advocates for a 25 basis-point rate cut, warning that persistently high borrowing costs are suppressing small businesses and slowing economic momentum. FDC also expects June’s inflation to drop, citing stable FX rates and falling fuel costs.
CBN Governor Olayemi Cardoso has consistently emphasized the apex bank’s commitment to price stability and foreign exchange reform. He reaffirmed that reducing inflation to single digits in the medium term remains a top priority, alongside consolidating market confidence.
The MPC’s decision this week will be pivotal in shaping Nigeria’s economic outlook for the second half of 2025. Whether the Committee opts for caution or stimulus, its verdict will send strong signals to investors, financial institutions, and the broader business community.