As the Central Bank of Nigeria’s Monetary Policy Committee (MPC) prepares for its 300th meeting scheduled for May 19 – 20, 2025, industry professionals expect a cautious but assertive outcome.
While the most probable decision is to maintain the Monetary Policy Rate (MPR) at 27.5%, a modest 25 basis point hike remains a possibility, as inflation remains structurally elevated despite signs of statistical easing.
At its last meeting in February, the MPC maintained the MPR at 27.5%, alongside other key policy parameters: liquidity ratio at 30%, CRR for commercial banks at 50%, and 16% for merchant banks.
The February decision came on the back of headline inflation moderating sharply to 24.48% in January from 34.80% in December 2024.
However, the MPC attributed the change to the National Bureau of Statistics’ CPI rebasing from 2009 to 2024, rather than any genuine disinflationary trend.
Recent data from April 2025 show that annual inflation has eased further to 23.71%, down from 24.23% in March. Food inflation also declined to 21.26% from 21.79%. On the surface, these improvements may appear to justify a dovish shift.
However, a deeper dive into the composite index shows continued pressure, with the headline inflation index rising from 117.34 in March to 119.52 in April, underscoring persistent price growth on a monthly basis.
Diverging expert views
Managing Director at Rostrum Investment & Securities Ltd, Mr. Olaitan S. Sunday, views the declining inflation as a sign of improving macroeconomic conditions.
“This downward trend reflects a potential easing in household cost burdens and hints at growing stability. Holding the MPR at 27.5% will continue to support the Naira, anchor inflation expectations, and bolster investor confidence in the Nigerian economy,” he noted.
Afrinvest’s Head of Research, Damilare Asimiyu, similarly expects a hold, citing key cost-side improvements.
“We forecast a moderate decline in May inflation, aided by relative exchange rate stability and the recent reduction in pump prices by Dangote Refinery from N835 to N825 per litre. This should modestly reduce business operating costs and improve household purchasing power,” the analyst said.
However, the underlying risks to economic recovery remain firmly in focus. On Drinks and Mics, an economic discussion podcast hosted by Nairametrics TV, analysts raised concerns about the current use of the CRR tool.
“CRR is so high and is being misused as a tool for liquidity management rather than its core purpose—to protect depositors,” a panellist argued. “This has significantly dampened private sector credit, restricting growth in key sectors like manufacturing and agriculture. When you combine this with rising insecurity, political uncertainty, and risks to oil production, the policy environment becomes more complex.”
According to the discussion, while monetary policy credibility is crucial, the excessive sterilization of liquidity via the CRR has compounded structural weaknesses in the economy.
The current stance has constrained credit extension to the private sector, undermining efforts to boost production and improve supply-side dynamics—at a time when the economy desperately needs real sector expansion.
David Adonri, MD of Highcap Securities, echoed this concern, stating, “Demand-side pressure remains too strong relative to supply, and the MPC must maintain its hawkish stance.”
Managing Director of Utica Capital Ltd, Mr Kanabe Ayegbeni, added: “The MPR has seen significant upward adjustments recently. Keeping it stable for now would help reinforce economic stabilization.”
From a risk management standpoint, however, some stakeholders still argue for caution.
The Vice Chairman of the board at Highcap Securities, David Adonri, believes the MPC may lean toward a tighter stance due to unresolved structural issues.
“The outcome of the next MPC meeting may not reflect the moderating inflation rate because foreseen threats to the economy require a proactive response,” he said. “Demand-side pressure is still too high compared to supply.”
Investment Manager at Redwood Asset Management, Olabode Odunniga, noted that while inflation is easing, it’s still high.
“Global uncertainties, including Trump’s tariffs and potential inflationary pass-throughs, remain risks. Rate cuts are unlikely until the second half of the year when we have clearer signals,” he stated.
Nairametrics outlook
Our base case remains unchanged; the MPC is likely to hold the MPR at 27.5% to consolidate recent gains in macroeconomic stability while staying flexible enough to act if inflationary pressures reaccelerate.
Nonetheless, we do not rule out a small hike of 25 basis points if the committee feels compelled to reinforce its hawkish posture, particularly amid lingering FX pressures and global uncertainties.
The committee is expected to stick with its data-driven, risk-averse playbook. Market participants should prepare for a steady outcome but keep an eye on forward guidance for clues on what lies ahead in H2 2025.