At the end of the 300th Monetary Policy Committee (MPC) meeting of the Central Bank of Nigeria (CBN), benchmark interest rate was held steady at 27.5 per cent along with other monetary parameters, a decision analysts said, was largely in line with market expectations, pointing to signs of macroeconomic stabilisation.
To this end, analysts have thrown their weight behind the decision, citing a mix of cautious optimism and persistent macroeconomic headwinds.
The decision marked the second consecutive hold by the apex bank following six aggressive rate hikes over the past 20 months. According to analysts at Financial Derivatives Company (FDC) the move was largely in line with market expectations, pointing to signs of macroeconomic stabilisation.
“The CBN took a cautious stance, maintaining the Monetary Policy Rate (MPR) to anchor inflation and exchange rate expectations amid global interest rate dynamics,” analysts at FDC noted, adding that, headline inflation has eased by 77 basis points in the last three months to 23.71 per cent, while the naira has remained relatively stable, depreciating by only 0.49 per cent to N1,623/$ since January.
FDC analysts also pointed to rising investor confidence and resilient economic activity. However, the firm warned that, with oil prices under pressure and global uncertainties rising, a wait-and-see approach was prudent to protect monetary buffers.
Afrinvest West Africa shared a similar view, stating that, the committee’s unanimous decision to maintain all policy parameters, including the asymmetric corridor, liquidity ratio, and cash reserve ratio, was a necessary step to avoid destabilising fragile macroeconomic gains.
The firm noted that, although some positive indicators such as foreign exchange reserve growth from $37.8 billion in March to $38.5 billion as at last week, easing PMS prices, and exchange rate convergence were recorded, downside risks remain.
“The collapse of crude oil prices below Nigeria’s budget benchmark of $75 per barrel and global trade tensions necessitated the decision to hold. Any adjustment now, either up or down—could derail macroeconomic stability,” Afrinvest warned.
Cowry Assets Management interpreted the policy hold as a strategic pause intended to allow the effects of previous rate hikes to filter through the economy. “The decision reflects both confidence in past measures and caution in light of persistent domestic and external risks,” it said in a note to clients.
However, Cowry raised concerns about the elevated cost of borrowing, warning that it continues to constrain access to credit for households and businesses. “This tight credit environment could dampen private sector investment and weaken overall economic activity in the medium term,” the firm stated.
As the outlook on inflation remains central to future policy direction, analysts at Cowry warned that if cost pressures, including possible increases in fuel prices and forex instability, Nigeria could see inflation spike again.
Analysts at Cordros Research also echoed the cautious sentiment, saying, the MPC’s posture is a reflection of broader economic uncertainties, noting that the committee emphasised the need to monitor domestic and global developments closely.
Cordros analysts added that, while the MPC did not provide explicit forward guidance, its actions suggest a data-dependent approach going forward. “If inflation continues to exhibit erratic behaviour, the CBN may maintain its current stance until there are clearer signals,” it said.
On the market front, the analysts observed that investors had already priced in the policy hold, leading to a marginal repricing of yields ahead of the meeting. The firm expects short-term yields to remain broadly stable, supported by expectations of a gradual moderation in inflation and a steady policy environment.
Despite the cautious optimism surrounding the MPC’s decision, Afrinvest warned that broader structural challenges remain unaddressed. The firm highlighted Nigeria’s underperformance in oil production, averaging 1.68 mbpd in April, below the 2.06mbpd budget benchmark, due to ongoing oil theft and security challenges in the Niger Delta.
It also cited fiscal indiscipline and lack of transparency in oil revenue management as key issues undermining the success of monetary policy. “The rapid increase in national debt, up by N40 trillion in 2024 alone to N144.7 trillion, without tangible improvement in public services underscores the limitations of monetary policy in isolation,” Afrinvest said.
