CBN May Pause Hawkish Stance As MPC Holds 301st Meeting

Ahead of the 310 meeting of the Monetary Policy Committee (MPC) of the Central Bank of Nigeria (CBN) to be held today and tomorrow (July 21–22, 2025), analysts anticipate a pause in monetary policy tightening, citing signs of macroeconomic stability and easing inflationary pressures.
Following months of aggressive rate hikes to combat spiralling inflation and a volatile exchange rate, key indicators suggest the worst may be over. Headline inflation, which had reached alarming highs earlier this year, slowed for the third consecutive month, settling at 22.22 per cent in June from 22.97 per cent in May.
At the same time, the naira has stabilised, buoyed by improved foreign exchange liquidity and a surge in foreign portfolio inflows, which jumped 315 per cent in June to $2.73 billion, the highest level since 2019. The naira has been stable trading between N1,528 and N1,535 to the dollar at the official end of the market in July.
At its last meeting in May, the Committee had made a unanimous decision to hold policy retaining the MPR at 27.50 per cent, the asymmetric corridor around the MPR at +500/-100 basis points, the Cash Reserve Ratio of Deposit Money Banks at 50.00 per cent and Merchant Banks at 16 per cent. The committee also left the Liquidity Ratio unchanged at 30.00 per cent.
According to analysts at Cordros Research, the MPC may be preparing to pivot towards monetary easing. “
To him, ‘with key macroeconomic indicators pointing to a more stable outlook, the Committee could initiate a gradual shift towards monetary policy easing.’
It projected that the MPC may cut the Monetary Policy Rate (MPR) by 50 basis points to 27.00 per cent, describing the move as ‘a cautious approach in a bid to balance the need to support economic growth with its mandate to ensure price and exchange rate stability.’

The economic backdrop appears to support a dovish tilt. Cordros estimates that Nigeria’s real GDP grew by 4.10 per cent year-on-year in Q2 2025, compared to 3.20 per cent in the same period last year, underpinned by growth across key sectors. The CBN’s Composite Purchasing Managers’ Index (PMI) also climbed to an average of 52.2 points in Q2, indicating continued private sector expansion.

Nonetheless, not all analysts are convinced that the time is ripe for rate cuts. Comercio Partners warned that despite disinflation in headline numbers, underlying price pressures persist.

“While headline inflation is easing, thanks to base effects, currency appreciation, and stable energy costs, rising food and core inflation highlight persistent domestic vulnerabilities. This divergence highlights the limits of base effects and currency gains in addressing structural inflation,” the analysts stressed,

The firm further cautioned that easing policy too soon could reverse recent gains in the foreign exchange market, saying, “maintaining the current interest rate is crucial for keeping Nigeria attractive to foreign portfolio investors. A rate cut at this stage could lead to a decline in portfolio inflows, triggering capital flight, exchange rate instability, and a potential reversal of recent gains in the forex market.”

Cowry Assets Management echoed this sentiment, citing the need for the MPC to remain data-driven and cautious. “We anticipate a policy hold stance, as the Committee maintains its data-dependent, cautious posture to balance price stability with economic recovery momentum,” it stated.

Despite the divergence in views, there is consensus that recent improvements in the macroeconomic landscape are significant. Forex inflows rose sharply in June, with foreign portfolio investments surging to $2.73 billion from $657.4 million in April—marking the strongest inflows since 2019. At the same time, the naira appreciated in June, while short-term interest rates declined, reflecting easing liquidity conditions.

Still, Comercio warned that deeper structural reforms remain essential. “Sustained disinflation will require targeted reforms, improved security in food-producing regions, and careful monetary policy to strike the right balance between growth and stability,” the firm said.

Cordros also noted that further easing may be implemented beyond just the policy rate. “The MPC may also lower the Cash Reserve Ratio (CRR) for Deposit Money Banks and Merchant Banks by 500bps to 45.0 per cent and 200bps to 14.0 per cent, respectively, while retaining other parameters, including the asymmetric corridor at around the MPR at +500/-100bps and Liquidity Ratio at 30.00 per cent,” it projected.