Key Points

• Nigeria’s monetary tightening continues as CBN interest rate retention unsettles markets.

• Investors react cautiously to CBN interest rate retention.

• Analysts warn growth could slow under CBN interest rate retention.

On Tuesday, Nigeria’s Monetary Policy Committee kept its benchmark interest rate at 27 percent, putting off any further tightening of monetary policy as policymakers try to keep the gains made in stabilising prices and the exchange rate. At the end of the committee’s 303rd meeting in Abuja, where all twelve members were there, Governor Olayemi Cardoso made the announcement.

Cardoso said that the bank’s earlier actions were still having an effect on the economy, and most of the MPC members agreed that the system needed more time to adjust to them. He stressed that keeping the policy stance was important for keeping disinflation on track, even though some parts of the private sector are pushing for lower borrowing costs.

MPC keeps its position to keep disinflation gains

The CBN has kept rates steady for the fourth time this year. The last time was in September, when they cut rates by 50 basis points, which was the first and only cut since a series of sharp hikes in 2024. During that time of tightening, the bank raised rates six times to try to lower inflation and support the naira.

The committee changed the corridor around the policy rate to +50/-450 basis points and kept the Cash Reserve Ratio at 45 percent for deposit money banks, 16 percent for merchant banks, and 75 percent for non-TSA public-sector deposits. The liquidity ratio stayed at 30%. The MPC said that these choices were based on keeping inflation going down and making sure that future choices are based on data.

The slowdown in inflation makes people more sure of the policy path

The CBN says that headline inflation has been going down for seven months in a row. It went from 34 percent a year ago to 16.05 percent in October. Food inflation went down to 13.12 percent and core inflation went down to 18.69 percent. The bank says these changes are due to tighter monetary conditions, more stable exchange rates, and more stable fuel prices.

Cardoso said that Nigeria had reached an important point with the return of macroeconomic stability. He said that investors who had been staying out because of the market’s ups and downs were starting to come back, saying, “After stability comes investment, and after investment comes growth.” He went on to say that Nigerians would slowly see the benefits in the form of more jobs and higher household incomes.

The outlook is better because of stronger reserves and a better global standing

One of the most important things that came out of the meeting was that external reserves went up sharply to $46.7 billion, up from $42.77 billion in September. This is enough to cover imports for about ten months. Cardoso said the job was “a good place to be” and that recent changes had made investors feel better about it.

He also talked about Nigeria’s recent removal from the Financial Action Task Force’s grey list, calling it a big step towards building trust in the global financial system and making it easier for banks to work together. Cardoso said that ongoing cooperation between the fiscal and monetary authorities was key to maintaining stability and would continue to be important as Nigeria moves towards a stronger framework for targeting inflation.