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… As eight banks surpass minimum recapitalisation threshold
The Central Bank of Nigeria (CBN) kept the Monetary Policy Rate (MPR) unchanged at 27.5 percent on Tuesday, signalling continued caution as inflation slows for a third consecutive month.
The decision announced by Olayemi Cardoso, CBN governor, at the conclusion of a two-day meeting of the Monetary Policy Committee (MPC) in Abuja, marked the third straight pause in the current tightening cycle.
All 12 MPC members, he said, voted to hold the MPR, maintain the asymmetric corridor at +500/-100 basis points, retain the Cash Reserve Ratio at 50 percent for deposit money banks and 16 percent for merchant banks, while keeping the liquidity ratio at 30 percent.
Cardoso said the committee’s decision was “premised on the need to sustain the momentum of disinflation and sufficiently contain price pressures.”
Headline inflation eased to 22.22 percent in June from 22.97 percent in May, driven by declines in energy prices and improved foreign exchange stability.
However, month-on-month inflation rose slightly to 1.68 percent, from 1.53 percent, with food and core inflation also accelerating due to higher costs in services, housing, and communication.
“The moderation in energy prices, particularly cooking gas, wood, charcoal, and diesel, played a significant role in easing headline inflation,” Cardoso told a press conference while addressing the outcomes of the MPC meeting.
However, core inflation rose to 22.76 percent in June, up from 22.28 percent in May, reflecting continued cost pressures in non-agricultural sectors.
Cardoso reaffirmed the CBN’s long-term commitment to price stability, emphasising the goal of bringing inflation back to single digits.
“The committee remains committed to the bank’s price stability mandate and would take appropriate measures to foster stability and confidence in the economy,” he said.
Despite some encouraging signs, Cardoso highlighted significant risks ahead, including geopolitical tensions and ongoing global trade disruptions that could further inflate import costs.
“The continued global uncertainties associated with tariff wars and geopolitical tensions could further exacerbate supply chain disruptions,” the governor warned.
On the financial sector, he expressed confidence in the banking system’s stability, citing strong financial soundness indicators and momentum in the CBN’s recapitalisation program.
Read also: How CBN reforms ease inflation, stabilise FX, lift reserves to $37.93bn
Eight banks meet capital requirements
Eight banks, he announced, have fully met and surpassed the new capital requirements, with others progressing toward the compliance deadline.
He mentioned the committee’s call on the central bank to maintain strong regulatory oversight to “ensure continued resilience, safety, and soundness of the financial system.”
Cardoso also noted that the external reserves had risen to over $40.11 billion as of July 18, providing about 9.5 months of import cover, helped by improved oil production, rising non-oil exports, and declining import volumes.
He said this reflects the positive impact of ongoing CBN bullish reforms.
He also noted that the economy grew by 3.13 percent year-on-year in the first quarter (Q1) of 2025, a modest acceleration from the 2.27 percent recorded a year earlier, supported by ongoing foreign exchange reforms and macroeconomic stabilisation efforts, as highlighted in the new GDP rebasing report released on Monday by the National Bureau of Statistics(NBS). The Purchasing Managers’ Index also continued to show expansion, underlining optimism in the private sector.
Looking ahead, the CBN expects further inflation easing in the coming months, buoyed by tight monetary conditions, harvest-season food supplies, and a stable naira, Cardoso stated.
However, he stressed the need to remain cautious, given “persistent uncertainty in the policy environment and underlying price pressures.”
He also acknowledged the role of government efforts to improve food security and urged continued support for farmers through timely provision of seedlings, fertilizers, and other inputs critical to the 2025 growing season.
“The MPC will continue to undertake rigorous assessment of economic conditions, price developments, and outlook to inform future policy decisions,” Cardoso assured.
Experts speak
Razia Khan, managing director, chief economist, Africa and Middle East Global Research, Standard Chartered Bank, said this was not entirely a surprise.
“Should we see ongoing naira stability and an improvement in food inflation after the harvest, then prospects for easing look more favourable from September. But the clear message from the CBN is that they will do everything cautiously, with the ultimate aim of bringing inflation to single digits – eventually. It’s notable that FX stability will not be sacrificed for any faster deceleration in LCY financing costs for the government.”
The Nigeria Employers’ Consultative Association (NECA), on its part, commended the MPC for its decision to sustain a tight monetary policy stance, describing it as a necessary step to consolidate recent economic gains and ensure long-term stability.
In a statement issued in Lagos, Adewale-Smatt Oyerinde, NECA’s director-general, described the decision as “a critical and timely intervention aimed at safeguarding Nigeria’s modest progress in reducing inflation, stabilising the naira, and attracting investor confidence.”
“Inflation eased from 24.48 percent in January to 22.22 percent in June 2025, capital inflows have improved, and the exchange rate has shown marginal appreciation. These indicators, though encouraging, remain fragile. The MPC’s data-informed and steady approach is commendable and sends a reassuring signal to investors and the private sector,” said Oyerinde.
While acknowledging the positive direction, NECA warned of lingering inflationary risks, particularly amid a 19.9 percent year-on-year increase in money supply and the ongoing banking sector recapitalisation efforts.
“A premature policy easing could unravel the delicate progress we’ve made and endanger economic stability,” the director-general cautioned.
He further emphasised the need for Nigeria to bolster its policy buffers against global headwinds, including rising global interest rates and volatile commodity markets.
NECA also reiterated its earlier call for a technical adjustment to the asymmetric corridor around the MPR, suggesting that such a move could inject targeted liquidity into the productive sector—especially SMEs and manufacturers—without undermining the primary objective of inflation control.
Looking ahead, Oyerinde urged the MPC and the CBN to adopt a dual-track approach: maintaining price stability while enhancing access to productive credit.
“It is essential to complement monetary tightening with policies that promote investment, job creation, and sustainable growth. This includes expanding targeted credit schemes, reducing regulatory bottlenecks, and improving foreign exchange access for manufacturers,” he added.
