CBN Holds Rate at 26.5% as Cardoso Cites External Shocks, Strong Reforms
By Aboki Forex —
The Central Bank of Nigeria (CBN) has left the Monetary Policy Rate (MPR) unchanged at 26.5 percent. All other monetary policy parameters also remain the same.
CBN Governor Olayemi Cardoso announced the decision after the 305th Monetary Policy Committee (MPC) meeting in Abuja on Tuesday. The Standing Facility Corridor around the MPR stays at +50/-450 basis points.
Cash Reserve Requirements (CRR) remain at 45 percent for deposit money banks, 16 percent for merchant banks, and 75 percent for non-TSA public sector deposits.
Reasons for holding rate
Cardoso said the MPC based its decision on a full assessment of risks to the outlook. Inflation has risen for two months in a row, driven by external shocks. But the committee sees this as temporary.
“The MPC recognised its transitory nature and remain confident that the current macroeconomic environment is sufficiently robust to support a return to disinflation,” Cardoso said.
The committee noted spillovers from the Middle East crisis. These have pushed up energy prices, transport costs, and other logistics. But the impact on Nigeria has been limited due to earlier policy reforms.
Cardoso listed those reforms: exchange rate stability, improved external reserves, stronger monetary policy transmission, a well-capitalised banking system, and ongoing fiscal consolidation. These have helped the economy absorb shocks.
“The pass-through of global commodity and energy price shocks to domestic inflation has been significantly mitigated and would have been more pronounced in the absence of these reforms,” he said.
The MPC believes the conditions for price stability remain firmly in place. Members agreed a cautious and vigilant policy stance is needed to anchor inflation expectations and safeguard macroeconomic stability.
Foreign reserves near $50 billion
Cardoso said Nigeria’s foreign reserves now stand at $49.49 billion, close to the level before the Middle East crisis. The reserves can cover nine months of imports.
He expressed optimism that this would boost investor confidence. The economy has a positive outlook and is expected to remain resilient.
In the near term, inflation may rise moderately due to external shocks. But Cardoso said this would be temporary. Enhanced food supply, a stable exchange rate, and other reforms by monetary and fiscal authorities will drive the expected growth.
No CBN intervention in FX market
Cardoso said the CBN is no longer intervening in the foreign exchange market. The market is now deep enough to operate on its own.
“What we have done is to meet the needs of loans repayment or needs of various government agencies. As we do this, so funds also flow in,” he explained.
Bank recapitalisation update
On the banking recapitalisation exercise, Cardoso said the CBN will remain proactive. The team will adopt measures to address potential post-recapitalisation risks and preserve financial system stability.
Banks that have not yet met the recapitalisation requirements due to regulatory or legal issues will be given an allowance to do so. The CBN will ensure financial system stability in the process.