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Nigeria's Monetary Policy Committee Unlikely to Reduce Rates in Second Half of 2025

Strategic Insights

— 2 min read

The Nigerian Monetary Policy Committee (MPC) is poised to maintain a tight monetary policy stance in the second half of 2025, despite naira stability and a slowdown in core inflation. According to Uche Uwaleke, professor of Capital Market and president of the Capital Market Academics of Nigeria, the MPC will likely hold all policy parameters constant, including the Monetary Policy Rate (MPR), due to persistent liquidity pressures, exchange rate pass-through effects, and recommendations from the International Monetary Fund (IMF). The IMF had advised the Central Bank of Nigeria (CBN) to maintain tight monetary conditions, citing the need to sustain disinflation momentum and manage inflationary pressures effectively.

Key Takeaways:

  • The Nigerian Monetary Policy Committee (MPC) is unlikely to reduce the Monetary Policy Rate (MPR) in the second half of 2025.
  • Uche Uwaleke, professor of Capital Market and president of the Capital Market Academics of Nigeria, cited persistent liquidity pressures driven by Federation Account Allocation Committee (FAAC) allocations, exchange rate pass-through effects, and the need to maintain positive real interest rates to attract portfolio inflows.
  • The IMF, in its 2025 Article IV Consultation Report, advised the CBN to maintain tight monetary conditions, stating that easing should only be considered if inflation slows significantly.
  • Inflation is projected to moderate further to around 20 percent by December 2025.
  • The MPC, at its 301st meeting held on July 21 and 22, 2025, reviewed recent economic and financial developments and decided to hold all policy parameters constant.
  • The MPR was retained at 27.5 percent, and the asymmetric corridor around the MPR was maintained at +500/-100 basis points.
  • Olayemi Cardoso, governor of the CBN, said the decision to maintain the current stance was informed by the need to sustain disinflation momentum and manage inflationary pressures effectively.
  • The economy is expected to continue recovering, supported by macroeconomic stability, steady FX markets, and improved earnings across corporates.
  • Import-dependent manufacturing stocks may remain pressured by high FX costs, while oil and gas stocks could remain vulnerable to global oil price volatility.
  • Uwaleke recommended focusing on fundamentally strong blue-chip equities, especially in the banking sector, and advising sustained investment in high-yielding Federal Government of Nigeria (FGN) securities and cautious exposure to longer-tenor naira bonds due to their sensitivity to interest rate changes.

Statistics:

  • Inflation rate projected to be around 20 percent by December 2025.
  • MPR retained at 27.5 percent.
  • Asymmetric corridor around the MPR maintained at +500/-100 basis points.
  • Cash reserve ratio (CRR) kept at 50.00 percent for deposit money banks and 16 percent for merchant banks.
  • Liquidity ratio remained unchanged at 30.00 percent.
  • Real yields projected to remain relatively high, continuing to attract both domestic and foreign investors.
  • Yields expected to moderate to around 12 to 13 percent as inflation gradually eases.

Sources:

  • Uche Uwaleke, presentation at the Arthur Steven Asset Management (ASAM) Webinar Series on Wednesday.
  • International Monetary Fund (IMF), 2025 Article IV Consultation Report.
  • Central Bank of Nigeria (CBN), Monetary Policy Committee meeting held on July 21 and 22, 2025.

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