MPC members of CBN to maintain status quo on rates, says analysts

A group of analysts at Cordros research have projected the Monetary Policy Committee (MPC) of the Central Bank of Nigeria (CBN) to maintain status quo on rates at the second meeting for this year.

The Committee (MPC) is expected to hold its second meeting of the year on May 19th and 20^th, 2025.

At the meeting in 2025, the committee voted to retain interest rate or Monetary Policy Rate at 27.50 per cent, retain the Cash Reserve Ratio (CRR) at 50 per cent for deposit money banks and 16 per cent for merchant banks.

Cordros in a report stated  that since the last MPC meeting, the global economic landscape has grown increasingly volatile and uncertain, primarily driven by persistent trade protectionist policies in the US.

“In our view, the MPC is likely to take these developments into account, particularly the elevated global uncertainty and its adverse implications for naira stability, despite a positive real rate of return, given the current inflation rate. 

“Against this backdrop, we expect the MPC to adopt a cautious stance, leaving the Monetary Policy Rate (MPR) unchanged, alongside retaining all other policy parameters in a bid to anchor inflation expectations and maintain the naira’s attractiveness.

In the FX market, the naira has come under renewed pressure. Heightened global uncertainty stemming from the tariff war triggered capital outflows from foreign portfolio investors, further tightening FX liquidity. In addition, international oil prices declined amid expectations of softer global demand and OPEC and its allies’ decision to raise crude oil supply, amplifying concerns about Nigeria’s external earnings outlook and the sustainability of its FX reserves. As such, the CBN increased its intervention in the FX market to meet the shortfall and curb excess naira volatility. Based on data from the FMDQ, CBN’s net inflow into the FX market in March and April reached USD2.61 billion, compared to the net outflow of USD928.40 million in January and February this year, when capital inflows were stronger. The external reserves also fell to an 8-month low of USD37.80 billion in April on account of higher FX supply and debt service payments before increasing again to USD38.22 billion as of 12 May. On average, the naira weakened by 3.52% m/m to NGN1,579.80/USD in April from NGN1,524.27/USD in March. So far in May, the closing rate has hovered around NGN1,589.00/USD – NGN1,615.00/USD. Looking ahead, we believe risks to the naira’s stability in the near term are tilted to the downside given the persistent global uncertainty despite the ease in US trade tariffs.

Under the new CPI methodology, the current inflation rate suggests a return to positive real interest rates. However, challenges in interpreting inflation dynamics under the rebased CPI framework are likely to remain a key concern for the MPC. In our view, inflation risks are tilted to the upside, particularly as the naira continues to experience gradual depreciation, reinforcing the need to anchor inflation expectations.

Moreover, the MPC is expected to weigh the implications of heightened global uncertainty and the persistence of elevated global interest rates, which justify the need to preserve interest rate differentials and limit capital outflows. In this context, a rate cut—especially against the backdrop of weaker oil prices and fragile investor sentiment—could undermine foreign investor confidence. Accordingly, we expect the MPC to maintain a cautious stance by holding the MPR at 27.5% and leaving all other policy parameters unchanged.

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