CBN Keeps Interest Rate at 27.5% Amid Cautious Inflation Outlook

Beulah Godfrey

May 20, 2025
3 min read

The Central Bank of Nigeria (CBN) has kept its benchmark interest rate unchanged at 27.5% for the second consecutive time, as policymakers adopt a wait-and-see approach in response to evolving inflation trends and economic conditions.

The Monetary Policy Committee (MPC) voted unanimously to hold the rate steady during its May 2025 meeting. The decision comes after a similar stance in February and reflects the central bank’s effort to balance inflation control with economic recovery. CBN Governor Olayemi Cardoso explained that the committee considered recent improvements in key macroeconomic indicators, such as exchange rate stability and a slowdown in fuel price hikes.

Cardoso noted that food inflation is also gradually moderating. He praised government actions aimed at boosting food supply and improving security in farming areas, both of which have helped ease price pressures in the food sector.

CBN Stays the Course as Inflation Pressures Ease

Analysts had widely expected the central bank to hold the rate. Many argued that further tightening could harm business activity, while cutting the rate too soon might worsen inflation. “The recent stability in price levels and the naira reduces the urgency for more tightening,” said Felicia Awolope, Senior Investment Research Analyst at Meristem.

Since early 2024, the CBN has raised rates aggressively to curb inflation and stabilise the naira. This latest decision signals a pause to assess the impact of those hikes, rather than a shift in direction.

In April, Nigeria’s headline inflation stood at 23.71%, but food price increases have slowed on a monthly basis. At the same time, the naira has gained strength, helped by improved investor confidence and better foreign exchange inflows.

Steady Rates May Attract Foreign Investment

Banking and investment analyst Ola A explained that keeping the rate steady supports foreign portfolio inflows, which are sensitive to interest rates and currency movements. “This decision aligns with the CBN’s commitment to orthodox monetary policy and long-term price stability,” he said.

Despite recent gains, the MPC acknowledged lingering risks. These include high electricity tariffs, ongoing foreign exchange demand, and structural weaknesses in the economy. Cardoso urged fiscal authorities to step up efforts to boost foreign exchange earnings, especially through oil, gas, and non-oil exports.

The next MPC meeting is set for July 21–22. Investors and analysts will closely monitor inflation trends and foreign exchange conditions for clues on whether the central bank will continue its cautious stance or begin easing if price pressures subside further.