CBN Holds Interest Rates Steady for Third Consecutive Time as Inflation Cools to 22.22%
story written by okafor joseph
CBN Maintains Interest Rates for Third Straight Time as Inflation Shows Signs of Cooling
The Central Bank of Nigeria (CBN) has held its benchmark interest rate steady for the third consecutive time, citing easing inflation pressures and strengthening investor confidence in the economy.
CBN Governor Olayemi Cardoso, speaking after the July 2025 Monetary Policy Committee (MPC) meeting, said the decision reflects the bank’s cautious approach to consolidating recent gains in macroeconomic stability. Headline inflation eased to 22.22% in June from 22.97% in May, largely due to falling energy prices and improved foreign exchange conditions.
“Moderation in the prices of cooking gas, diesel, charcoal, and other energy sources contributed significantly to the decline in headline inflation,” Cardoso noted.
Despite this progress, month-on-month inflation edged higher to 1.68% from 1.53%, with core inflation also rising to 22.76% in June from 22.28% the previous month, driven by increasing costs in services, housing, and communication.
CBN Reaffirms Commitment to Price Stability
Governor Cardoso reiterated the apex bank’s commitment to achieving long-term price stability and returning inflation to single-digit levels.
“The MPC remains fully committed to the CBN’s mandate of price stability and will continue to deploy appropriate tools to foster economic confidence and growth,” he said.
He cautioned, however, that global risks such as geopolitical tensions, trade disruptions, and potential tariff wars could impact Nigeria’s supply chains and increase import costs.
Banking Sector Shows Strong Stability
On the financial sector, Cardoso assured that Nigeria’s banking system remains strong and resilient. He disclosed that eight commercial banks have already met the new capital requirements ahead of schedule, while others are making progress toward full compliance.
The CBN, he added, will maintain strict regulatory oversight to ensure the safety and soundness of the financial system.
External Reserves and Economic Growth Strengthen
Cardoso also announced that Nigeria’s external reserves rose to $40.11 billion as of July 18, offering 9.5 months of import cover, thanks to higher oil production, increased non-oil exports, and declining import demand.
Nigeria’s economy expanded by 3.13% year-on-year in the first quarter of 2025, up from 2.27% in Q1 2024, according to the newly rebased GDP report by the National Bureau of Statistics. This growth was supported by sustained FX reforms and macroeconomic stabilization.
The Purchasing Managers’ Index (PMI) continued its upward trend, indicating optimism in the private sector and suggesting continued expansion in the coming quarters.
Inflation Outlook and Expert Reactions
Looking ahead, the CBN expects inflation to ease further, supported by a stable naira, seasonal food supplies during the harvest, and continued tight monetary policy. Still, Cardoso emphasized the need for caution amid lingering uncertainties and structural challenges.
He called for stronger government support for food security, urging timely distribution of farm inputs such as seeds and fertilizers to ensure a successful 2025 harvest.
Market Reactions and Economic Insights
Standard Chartered’s Chief Economist for Africa and the Middle East, Razia Khan, said the CBN’s cautious stance was expected.
“With naira stability and lower food inflation likely after the harvest, the outlook for rate easing may improve by September. But the CBN has clearly stated its priority: inflation must fall sustainably, even if it means keeping rates high,” Khan said.
The Nigeria Employers’ Consultative Association (NECA) also praised the decision, saying that maintaining a tight monetary policy is essential to preserving recent economic gains.
NECA urged the CBN to consider technical adjustments to the monetary framework—particularly the asymmetric corridor around the MPR—to enhance access to credit for SMEs and manufacturers without jeopardizing inflation control.
“A dual-track strategy—combining price stability with targeted credit expansion—is key to unlocking investments, creating jobs, and supporting inclusive economic growth,” said NECA’s Director-General, Adewale Oyerinde.
As Nigeria navigates a delicate economic recovery, the CBN’s firm stance on interest rates underscores its resolve to maintain macroeconomic discipline while preparing the ground for sustainable growth.
