On February 20, 2025, the Central Bank of Nigeria's (CBN) decided to retain the Monetary Policy Rate (MPR) at 27.5% for the first time in over two years is a significant move that affirms the success of the inflation control measures. This decision follows a report by the National Bureau of Statistics (NBS) that Nigeria's inflation rate dropped to 24.48% from 34.8% after rebasing the consumer index price (CPI).
The CBN's decision to hold the MPR is a deliberate move to balance the need to control inflation with the need to support economic growth. Raising interest rates would have depressed consumption and increased the cost of borrowing to the real sector, which could have hindered economic growth. By retaining the interest rate, the CBN is providing a stable environment for businesses to operate and for investors to invest.
The drop in inflation rate from 34.8% to 24.48% is a clear indication that the CBN's inflation control measures are working. The CBN's decision to increase the interest rate 15 consecutive times since May 2022 was a bold move to combat inflation ². The move has helped to reduce the money supply and inflationary pressures in the economy.
The CBN's decision to retain the interest rate is expected to have a positive impact on the economy. It will help to:
- Boost Investor Confidence: Already major stakeholders such as the Lagos Chamber of Commerce and Industry (LCCI) have commended the CBN's decision, stating that it will boost investor confidence.
- Support Economic Growth: By providing a stable environment for businesses to operate, the CBN's decision will support economic growth.
- Reduce Inflationary Pressures: The CBN's decision will help to reduce inflationary pressures in the economy, which will benefit consumers and businesses.
Importantly, the decision aligns with the government's economic reform agenda. By keeping the interest rate steady, the CBN is providing a stable environment for businesses to operate and for investors to invest, which is critical for driving economic growth.
It is also significant in the context of Nigeria's projected economic growth rate of 4.1% in 2025. The CBN's move is expected to support the government's efforts to restore macroeconomic stability, boost private sector development, and expand social protection.
By retaining the interest rate, the CBN is also acknowledging the progress made so far in reducing inflation. This move suggests that the CBN is confident that the current monetary policy stance is effective in managing inflation and supporting economic growth.
Furthermore, the CBN's decision to retain the interest rate is a signal that the bank is committed to supporting the government's vision for a $1 trillion economy. By providing a stable monetary policy environment, the CBN is helping to create an enabling environment for businesses to thrive and for investors to invest in the Nigerian economy.
Overall, the CBN's decision to retain the interest rate is a positive move that supports the government's economic reform agenda and is expected to contribute to Nigeria's economic growth and development.
As the CBN continues to implement measures to control inflation and support economic growth, it is essential for businesses and investors to take advantage of the opportunities presented by the CBN's decision.
