CBN Targets Single-Digit Inflation
…Holds All Monetary Policy Parameters
By Patience Ikpeme
The Central Bank of Nigeria (CBN) has set its sights on achieving a single-digit inflation rate in the medium to long term, following the recent rebasing of the economy and a slight dip in inflation to 24.48%.
CBN Governor Olayemi Cardoso made this announcement at the conclusion of the first Monetary Policy Committee (MPC) meeting of 2025. “Our objectives in the medium to long term, is to ensure that we’re able to bring this down from the double digit to the single digit,” Cardoso stated.
The MPC, after two days of deliberation, decided to hold all monetary policy parameters. Consequently, the Monetary Policy Rate (MPR) remains at 27.50%, the asymmetric corridor around the MPR is retained at +500/-100 basis points, the Cash Reserve Ratio (CRR) for Deposit Money Banks stays at 50.00% and for Merchant Banks at 16%, and the Liquidity Ratio is held at 30.00%. Cardoso affirmed that the CBN will continue its current orthodox monetary policies.
Addressing the measures taken to manage inflation, Cardoso stated that, “We have seen the outcome, and it’s in a positive direction. And we will stay that course. We will certainly stay that course. We will be vigilant. We will not take anything for granted. We believe that inflation has been too high for too long.”
Clarifying the implications of the rebased CPI figures, the CBN Governor cautioned against misinterpreting the recent inflation numbers. “With respect to the rebased CPI number, just for clarity, nobody should be afraid that inflation has fallen to that level.
“No, because you are really comparing apples and oranges. So I think that should be very clear that there still needs to get other figures going forward to be able to make the comparisons that you may be referring to,” he explained.
Cardoso added that the CBN has received and is analyzing the data, promising to provide further guidance in due course.
However, he noted the positive trend, stating, “But suffice to say, though, that we can see that inflation is gradually trending down. And I think that is the issue that I don’t want anybody here to go away without understanding. That inflation is trending down and it’s looking positive. All the indices are looking positive. The foreign exchange rate, we all know, has started to trend down and is more or less achieved stability. It’s been stable and we’ve spoken about the differential in the rates down to less than 1%, which is unusual.”
Cardoso stressed the critical importance of coordination between fiscal and monetary authorities. “I cannot overemphasize how important it is at this time now. Because it is coordination that will ensure that the gains that we have made in the various markets not only hold, but continue to improve. I will be deceiving you to say the fiscal will do it on its own, the monetary will do it on its own. It won’t be,” he asserted.
He noted the commitment to deepen dialogue with the fiscal side, expanding discussions to cover a wider range of economic issues, and to ensure regular communication.
Regarding the balance between controlling inflation and sustaining economic growth, particularly with high borrowing costs and limited access to credit, Cardoso stated, “Our objectives have been and will continue to be to achieve stability in the foreign exchange markets and in the financial markets. That’s our objective. And as long as that happens, we are confident that we will begin to see more investments coming in, which should spur the badly needed growth.” He stressed the increased competitiveness of the Nigerian currency and the growing interest from international investors.
The MPC’s unanimous decision to retain all parameters reflects their satisfaction with recent macroeconomic developments, which are expected to positively influence price dynamics.
These developments include stability in the foreign exchange market, the resulting appreciation of the exchange rate, and the gradual moderation in PMS prices. The Committee, however, remains mindful of the risk of persistent inflationary pressures, largely driven by food prices.
They reiterated the benefits of increased collaboration between monetary and fiscal authorities and urged its continued strengthening. The MPC also acknowledged improvements in the external sector, including the convergence of exchange rates and measures to boost market liquidity.
Members of the Committee anticipate increased foreign direct and portfolio investments, as well as diaspora remittances, as investor confidence improves. The MPC observed the resilience of the banking system despite macroeconomic challenges and urged continued surveillance, especially during the ongoing recapitalization exercise.
Overall, the MPC acknowledged the various policies aimed at anchoring inflation expectations, easing exchange rate pressures, and improving the transmission mechanism of monetary policy.
