ANALYSIS: Why CBN retained MPR at 27% despite easing inflation
OMEIZA BILAL takes a look at the Monetary Policy Committee’s decision and how it has helped to stabilize the economy.
The Central Bank of Nigeria (CBN) has on Tuesday retained the Monetary Policy Rate (MPR) at 27 percent, maintaining its tight monetary position as part of ongoing efforts to stabilize the country’s economy, control the inflation and foreign exchange market.
The decision came as a surprise to market stakeholders, who anticipated a decline in the rate, based on the current report of National Bureau of Statistics, which clearly stated that the inflation numbers are easing.
The decision to retain rates comes amid what the bank described as continuing disinflationary trend in the Nigerian economy.
Analysts are of the opinion that the expected decline in the rates is not too healthy for the economy, caution the bank against taking any decisions that could jeopardize the efforts of the ongoing reforms. The central bank’s careful approach indicates it is monitoring economic indicators closely before committing to further rate reductions.
Key Decisions and Analysis
The MPC meeting, chaired by CBN Governor Olayemi Cardoso, took the following key decisions:
- Monetary Policy Rate (MPR): Retained at 27.0%.
- Asymmetric Corridor: Adjusted around the MPR to +50/-450 basis points from the previous +250/-250 basis points.
- Cash Reserve Ratio (CRR): Retained for commercial banks at 45% (and 16% for merchant banks).
- Liquidity Ratio: Retained at 30%.
Breakdown of the decision
The decision to hold the MPR after a 50-basis-point cut in September 2025, marks a cautious pause in the easing cycle.
CBN Governor, Olayemi Cardoso, explained that the committee’s choice to hold the rate reflects its assessment that current monetary conditions are beginning to yield positive results.
The Committee also voted to retain the Cash Reserve Ratio (CRR) for commercial banks at 45 percent, while that of merchant banks was maintained at 16 percent, reaffirming the Bank’s commitment to managing system liquidity effectively.
These actions marked the early signs of a cautious shift as inflation indicators showed mild improvement.
The Committee is navigating a balance between controlling inflation and stimulating economic growth. Despite the disinflationary trend which shows, (headline inflation fell to 16.05% in October 2025), members felt the economic outlook wasn’t strong enough for another rate reduction. The primary goal is to pursue price stability. Policymakers want to ensure the decline in inflation is durable and sustained, driven by the lagged effects of previous tightening, a stable exchange rate, and an improved harvest season.
The decision was made against a backdrop of positive economic indicators, including: Improved Gross Domestic Product (GDP) growth of 4.23% in Q2 2025; a significant increase in the Purchasing Managers Index (PMI) to a five-year high in November 2025; and an increase in gross external reserves, sufficient to cover over 10 months of imports.
The hold decision surprised analysts who had predicted a further cut of 25-50 basis points.
The adjustment to the standing facilities corridor (the operational rates around the MPR) is seen as a way to enhance monetary policy transmission without changing the main rate.
The reduction of Cash Reserve Ratio (CRR) from 50% to 45 mean banks now have more lendable funds.
The sustained tight stance is also expected to help contain speculative pressures in the FX market and support the naira’s resilience amid global and domestic headwinds.
With the next MPC meeting scheduled for February 2026, stakeholders will be watching closely to see whether inflation continues to ease sufficiently to warrant a shift towards a more accommodative monetary stance.
