The Central Bank of Nigeria (CBN) has confirmed that the 299th meeting of its Monetary Policy Committee (MPC), initially scheduled for February 17 and 18, 2025, will now take place on Wednesday, February 19 and Thursday, February 20, 2025.
This change has put to rest any speculations about the meeting dates, especially in light of delays by the National Bureau of Statistics (NBS) in releasing the rebased Consumer Price Index (CPI).
Now that the dates have been set, economists and analysts are turning their focus to the upcoming MPC meeting, eager to determine whether the CBN will decide to maintain the current monetary policy rate (MPR) or opt for a rate hike, given the prevailing economic trends.
Read also: CBN to hold first MPC meeting of 2025 in February
Ayokunle Olubunmi, the head of financial institutions ratings at Agusto Consulting, believes that inflation and the exchange rate will remain central to the discussions at the MPC meeting.
The extent of policy tightening that has already been implemented this year by the CBN and the emerging results may tend to suggest the need for a hold option.
This was the submission of Olayemi Cardoso, governor of the CBN in his personal statement at the last Monetary Policy Committee meeting in November 2024.
He noted that inflation had shown signs of reversing in September, with the upward trend in inflation continuing into October due to price adjustments, particularly in the retail price of Premium Motor Spirit (PMS) during the third quarter.
According to the National Bureau of Statistics (NBS), Nigeria’s inflation rate rose to 34.80 percent in December 2024, up slightly from 34.60 percent in November 2024. To combat this, the CBN pursued a tight monetary policy in 2024, resulting in an increase of about 875 basis points, which pushed the MPR from 18.75 percent in 2023 to 27.50 percent by the end of 2024.
In his statement, Cardoso emphasised that the CBN must continue to take a firm stance against inflationary pressures, remaining vigilant until a consistent decline in inflation is evident. He also highlighted the positive outcomes of the tight policy, such as increased capital inflows, relative stability in the foreign exchange market, and the narrowing of exchange rate disparities across various market segments.
Cardoso expressed optimism that, by maintaining its policy course, the CBN can achieve its broader goals of fostering a stable and resilient macroeconomic environment, which will ultimately contribute to sustainable growth and price stability. He also voted in favour of raising the MPR by 25 basis points, from 27.25 percent to 27.50 percent, while maintaining the asymmetric corridor around the MPR at -100/+500 basis points, keeping the Cash Reserve Requirement (CRR) for Deposit Money Banks at 50 percent and for Merchant Banks at 16 percent, and leaving the liquidity ratio unchanged at 30 percent.
Aloysius Uche Ordu, another member of the MPC, pointed out that the tight monetary policy has led to a slowdown in credit growth, with broad money supply (M3) falling by approximately N1.7 trillion in October 2024 compared to the previous month. He noted that credit to the private sector also declined by N1.9 trillion in the same period, signaling a reduction in aggregate demand, which could help alleviate inflationary pressures.
For Lamido Abubakar Yuguda, the significant tightening of monetary policy over the past year, combined with strengthened collaboration between the monetary and fiscal authorities, has played a key role in stabilising the exchange rate and curbing inflation, despite unprecedented domestic price increases. He also pointed to improvements in the balance of payments and a substantial increase in foreign exchange reserves, largely driven by rising capital inflows and personal remittances.
Yuguda stressed the need to maintain the current tight monetary stance to ensure continued progress in disinflation, preserve exchange rate stability, and protect the country’s external buffers.
Read also: How CBN plans to beat inflation with new policies
Bandele Amoo, another MPC member, expressed caution, noting that it may still be premature to end the tightening cycle, as inflation moderation and exchange rate stability have yet to fully materialize. He suggested that a modest 25-basis-point increase in the MPR could be beneficial, allowing the effects of prior hikes to permeate the economy and continue addressing rising inflation. However, he acknowledged that further increases in the MPR could negatively impact the real sector, particularly regarding corporate borrowing costs.
At the November 2024 MPC meeting, the Committee unanimously decided to tighten the policy further by raising the MPR by 25 basis points to 27.50 percent, maintaining the asymmetric corridor at +500/-100 basis points, and keeping the CRR for Deposit Money Banks at 50 percent and Merchant Banks at 16 percent. The liquidity ratio was also retained at 30 percent.
The MPC also acknowledged the CBN’s efforts in advancing financial inclusion, which has contributed to improving the transmission mechanism of monetary policy and enhancing its effectiveness.
Cardoso concluded by saying that the Committee remained focused on making the best policy choices to address rising inflation, stabilise the exchange rate, and manage inflation expectations effectively. The MPC also expressed optimism that the full deregulation of the petroleum industry’s downstream sector would help eliminate fuel shortages and stabilise prices in the medium to short term. The members reiterated the importance of deepening collaboration between the monetary and fiscal authorities to achieve the synchronised goals of price stability and sustainable economic growth.
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