CBN Sustains Tight Policy Stance
…Holds MPR at 27.0% Amid Sustained Disinflation
By Patience Ikpeme
The Monetary Policy Committee (MPC) of the Central Bank of Nigeria (CBN), at the conclusion of its final meeting for 2025, voted by a majority to retain the benchmark Monetary Policy Rate (MPR) at 27.0 per cent.
The Committee’s decision, announced by CBN Governor Mr. Olayemi Cardoso, reflects a commitment to ensuring the ongoing moderation of inflation.
In its statement, the MPC adjusted the Standing Facility Corridor around the MPR to +50/-450 basis points. Other key parameters were kept unchanged: the Cash Reserve Requirement (CRR) for Deposit Money Banks remains at 45.00 per cent, Merchant Banks at 16.00 per cent, and 75.00 per cent for non-TSA public sector deposits, with the Liquidity Ratio held at 30.00 per cent.
Governor Cardoso explained that the decision was “underpinned by the need to sustain the progress made so far towards achieving low and stable inflation.” The MPC’s deliberation centered on allowing the full impact of previous policy tightening measures to transmit to the real economy.
The Committee observed the continued deceleration in the year-on-year headline inflation rate for the seventh consecutive month, a development it described as “favourable.” The headline inflation rate fell to 16.05 per cent in October 2025, a notable decline from the 18.02 per cent recorded in September.
This softening in prices was attributed to several factors, including sustained monetary policy tightening, a stable exchange rate, increased capital inflows, a surplus current account balance, and improved food supply.
Food inflation dropped significantly to 13.12 per cent in October from 16.87 per cent in the preceding month, reflecting improved domestic food supply and stable exchange rate dynamics. Similarly, core inflation slowed to 18.69 per cent (year-on-year) from 19.53 per cent, owing largely to a decline in the price of furnishing and household maintenance.
Despite this positive trend, the MPC noted that “headline inflation remains high at double digit requiring sustained efforts toward moderating it further.” The Committee believes that the steady deceleration in headline, core, and food inflation “suggests that the lagged impact of previous tight policy measures is expected to continue in the near term.”
The MPC acknowledged the robust performance of the external sector, which has contributed to currency stability and easing inflation. This performance is “evidenced by the surplus current account balance and steady accretion to reserves,” which reached a high of US$46.70 billion on November 14, 2025, from US$42.77 billion at the end of September 2025. This figure is sufficient to cover 10.3 months of import for goods and services.
Members commended the collaborative efforts between the fiscal and monetary authorities, which have resulted in the recent upgrade of Nigeria’s sovereign credit rating by major agencies and the removal of the country from the Financial Action Task Force (FATF) grey list. The Committee stated that these positive developments “would further boost investor confidence and improve capital flows to the economy.”
The Committee also expressed satisfaction with the sustained resilience of the banking system, noting that “most financial soundness indicators remaining within regulatory thresholds.” It acknowledged substantial progress in the ongoing recapitalization programme, with sixteen (16) banks achieving full compliance, and urged the Bank to ensure its successful conclusion.
On economic growth, the MPC noted the positive trajectory of Real Gross Domestic Product (GDP), which grew by 4.23 per cent (year-on-year) in the second quarter of 2025, up from 3.13 per cent in the first quarter. Furthermore, the Purchasing Manager’s Index increased significantly to 56.4 points in November 2025, the highest in the last five years, pointing to a positive growth outlook for the third and fourth quarters of 2025.
The MPC concludes that a “sustained disinflation in the near term” is forecasted, driven by the lagged effect of previous tightening and the continued stability in the foreign exchange market, alongside an expected boost in local food supply from the seasonal harvest cycle. The Committee stated its intention to maintain a “data-driven assessment of developments and outlook to guide future policy decisions.”
