CBN Maintains Tight Monetary Stance as Inflation Battle Continues
The Central Bank of Nigeria has decided to keep its benchmark interest rate unchanged at 27 percent, reinforcing its aggressive approach to tackling persistent inflation in Africa's largest economy. CBN Governor Olayemi Cardoso made this significant announcement during a press conference following the conclusion of the Monetary Policy Committee's 303rd meeting held in Abuja.
Key Policy Decisions Announced
The Monetary Policy Committee voted unanimously to maintain the current monetary policy configuration, demonstrating the central bank's commitment to price stability. Beyond the main policy rate, the committee also retained several other crucial financial parameters:
The Cash Reserve Ratio remains at 45 percent for commercial banks, while merchant banks must maintain 16 percent. For non-TSA public sector deposits, the ratio stays at a substantial 75 percent.
The committee maintained the Liquidity Ratio at 30 percent and adjusted the Standing Facilities Corridor to +50 / -450 basis points around the MPR.
Rationale Behind the Decision
According to the MPC, these decisions reflect the bank's unwavering focus on achieving low and stable inflation. The committee noted that headline inflation has begun to decelerate due to several factors including sustained monetary tightening, improved exchange rate stability, and price stability in Premium Motor Spirit (PMS).
Governor Cardoso provided insights into the global economic context, stating that while medium-term recovery appears intact, trade tensions between the United States and key trading partners could present risks to global growth. He added that global inflation is expected to remain above pre-pandemic levels in the near term.
Progress in Banking Sector Reforms
The committee acknowledged significant advancements in the ongoing bank recapitalisation programme, revealing that 16 banks have already met regulatory requirements. This development signals strengthening resilience within Nigeria's financial system.
Governor Cardoso reaffirmed the CBN's dedication to evidence-based monetary policy aimed primarily at protecting price stability while simultaneously strengthening the robustness of Nigeria's financial architecture. The maintained tight monetary stance indicates the central bank's determination to continue its inflation-fighting measures until sustainable price stability is achieved.
