Abuja: The Central Bank of Nigeria (CBN) has announced a reduction in the Monetary Policy Rate (MPR) by 50 basis points, bringing it down to 26.50% from the previous 27%. This decision was influenced by the sustained decline in year-on-year inflation rates, as stated by CBN Governor Yemi Cardoso during the presentation of the communiqu© from the 304th meeting of the Monetary Policy Committee (MPC).
According to News Agency of Nigeria, the MPC’s decision to lower the MPR comes in the wake of an 11-month consecutive decline in headline inflation, observed since January. The reduction aims to reflect the effects of the contractionary monetary policy that has been in place, which has contributed to stability in the foreign exchange market, increased capital inflows, and improvements in the balance of payments.
The committee has also decided to maintain the Cash Reserve Ratio (CRR) at 45% for commercial banks and 16% for merchant banks, along with retaining the Liquidity Ratio at 30%. The Standing Facilities Corridor remains at +50/-450 basis points around the MPR. Cardoso highlighted that the downward trend in inflation is further supported by stable petroleum product prices and improved food supply conditions, particularly in staple foods, which have helped anchor economic expectations.
The MPC noted the strong performance of Nigeria’s external sector, marked by increased foreign exchange reserves due to higher export earnings and remittance inflows, which have fostered stability in the foreign exchange market and boosted investor confidence. Additionally, the newly issued Presidential Executive Order 09, which directs oil and gas revenues into the federation account, was acknowledged by the committee for its potential to enhance fiscal revenue and reserves.
In light of these improved macroeconomic conditions, the committee concluded that moderate easing of the MPR aligns with the current inflation dynamics.