MPC to hold rates amid global trade turbulence, FX pressures

As the Central Bank of Nigeria’s (CBN) Monetary Policy Committee (MPC) convenes for its second meeting of the year on May 19 and 20, policymakers face a complex and delicate balancing act. 

The global economic landscape is increasingly clouded by heightened trade protectionism—most notably from the United States—while Nigeria contends with currency volatility and fragile capital inflows. Amid these crosscurrents, the MPC is broadly expected to maintain a steady hand, holding the Monetary Policy Rate (MPR) at 27.5per cent and leaving other key levers—Cash Reserve Ratio (CRR) and Liquidity Ratio—unchanged.

Though the recent shift into positive real interest rate territory could, under different circumstances, encourage a dovish turn, prevailing macroeconomic headwinds suggest otherwise. Analysts anticipate a cautious, if not outright hawkish, stance—anchored by the need to stabilize the naira and safeguard investor confidence in the face of external volatility.

The MPC’s deliberations are coming against a backdrop of diverging economic data which paint a picture of gradual recovery tempered by foreign exchange strain. The Composite Purchasing Managers’ Index rose to 52.2 in April, signaling sustained expansion across key sectors. As a result, Q1 GDP growth was revised upwards to 3.62per cent year-on-year, with full-year projections now at 3.90per cent, contingent on external stability.

Crude oil production has marginally improved, with average daily output reaching 1.67 million barrels in Q1—up from 1.54 million barrels in the same period last year. However, these gains are threatened by renewed naira volatility. The currency depreciated 3.52% month-on-month in April, with average rates now hovering between NN1,589 and NGN1,615 per dollar. Capital outflows and declining oil prices have intensified FX pressures, prompting the CBN to escalate intervention efforts, reversing earlier net outflows with $2.61 billion in net inflows over March and April.

Although inflationary pressures have begun to ease—helped by a firmer naira and lower energy costs—underlying risks remain. The rebased CPI figures complicate direct historical comparisons, but price levels remain elevated and susceptible to further currency-driven shocks. Any premature loosening of policy, analysts warn, could erode Nigeria’s yield advantage, spark renewed capital flight, and undermine macroeconomic stability.

Against this volatile backdrop, the MPC is poised to project policy continuity over interventionist agility. With inflation expectations still unanchored and external buffers under strain, preserving financial stability is likely to take precedence over growth stimulation.

“In a climate of profound global uncertainty, the most credible message the MPC can send is one of consistency,” said a Lagos-based economist. “Nigeria cannot afford policy missteps when the path ahead is already so narrow.”

As the nation’s monetary guardians gather in Abuja, the choice is clear: steady the ship, even as global headwinds gather force.

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