Loan rate of 27.5%: need for more time to evaluate macroeconomic trends

The central bank of Nigeria (CBN) recently decided to maintain its reference rate, the monetary policy rate (MPR), at 27.5 percent, marking the second consecutive time in 2025. The Apex bank cited different macroeconomic trends such as reasons to hold rates. David Agba reports.

At the 295th meeting of the Central Bank of the Nigeria Monetary Policy Committee (MPC), held on 20-21 May 2024, the Committee decided to increase the MPR by 150 basis to 26.25 percent from 24.75 percent; Store the asymmetrical corridor around the MPR to +100/-300 basic points; Keep the reserve report in cash of the money banks of the deposit at 45.00 percent and keep the liquidity ratio at 30.00 percent.

The Committee decided at the 296th MPC meeting held on 22 and 23 July 2024, to increase the MPR of 50 basis points to 26.75 percent from 26.25 percent; Adjust the asymmetrical corridor around the MPR to +500/-100 from +100/-300 basic points; Keep the reserve report in cash of the money banks of the deposit at 45.00 percent and the 14 % merchant banks and keep the liquidity ratio at 30.00 percent.

The Committee also decided at the 297th MPC meeting held on 23 and 24 September 2024, for: increase the MPR by 50 basis to 27.25 percent from 26.75 percent; Store the asymmetrical corridor around the MPR to +500/-100 basic points; Increase the cash reserve ratio between the deposit banks of the deposit at 50.00 percent from 45.00 percent and merchant banks to 16 % from 14 % and maintain the liquidity ratio at 30.00 percent.

The Committee decided at the 299th MPC meeting held on 19 and 20 February 2025, for: keep the MPR at 27.50 percent; Store the asymmetrical corridor around the MPR to +500/-100 basic points; Keep the reserve report in cash of the money banks of the deposit at 50.00 percent and the 16 %merchant banks. While he maintained the liquidity ratio at 30.00 percent.

Since the beginning of the administration of Ahmed Bola Tinubu, the nation’s tax and monetary policies have fought with stability problems, inflationary trends and volatility in foreign currency among others.

These challenges have placed a strong risk for Nigeria’s efforts towards micro and macroeconomic development with those to the shy of the affairs involving and evolve different approaches to curb the trends.

The monetary policy committee of the Central Bank of Nigeria (CBN) held its 300th meeting on 19 and 20 May 2025 and large -scale decisions were made.

The Governor of the Apex bank, Olayemi Cardoso, explained that the unanimous decision of the committee to hold the rate was to allow more time to evaluate recent macroeconomic trends. “The committee was unanimous in his decision to hold politics and therefore decided as follows: keeping the MPR at 27.50 percent,” he said.

Other decisions

The CBN has also maintained other key parameters: the asymmetrical corridor at +500/-100 basic points, the cash reserve ratio (CRR) of the money banks of deposits at 50 %, that of the 16 %merchant banks and the liquidity ratio at 30 %.

The MPC has attributed its decision to the recent improvements of economic indicators. According to the National Bureau of Statistics (NBS), the main inflation increased to 23.71 percent in April from 24.23 percent in March. Monthly inflation dropped from 3.9 percent to 1.86 percent. Food inflation also decreased to 21.26 percent from 21.79 percent, while the inflation of the nucleus slowed down 23.39 percent from 24.43 percent.

“The MPC observed the relative improvements in some key macroeconomic indicators that should support the overall moderation in medium -term prices,” said Cardoso.

Govt’s efforts to improve food supply/insecurity

He recognized government efforts to improve food supply and face insecurity in agricultural communities, while warning that inflationary pressures persist due to high electricity costs, gearbox demand and structural challenges.

According to him, the committee welcomed the ongoing tax and monetary reforms, in particular those aimed at enhancing internal production and reducing dependence on changes. Cardoso said that these efforts are essential to limit inflationary pass-through.

He said that the MPC also discussed the external reserves of Nigeria, which increased by 2.85 per cent to \ $ 38.90 billion from May 16, from \ $ 37.82 billion to March. The increase represents approximately 7.6 months of importing imports. The Committee praised the shrinking gap between official and parallel exchange rates and urged the tax authorities to grow the earnings of the changes, in particular from oil exports, gas and not oil.

Nation’s GDP growth

Cardoso also observed that Nigeria’s GDP grew by 3.84 percent in the 2024 quarter, compared to 3.46 percent in the previous quarter, led by oil and non -oil sectors, in particular the services.

Despite this, he warned that the fall of the prices of the raw-influenced by the increase in production from non-OPEC countries and by the uncertainties around the US commercial policies-could have an impact on government revenues and the implementation of the national budget.

The man expresses concern

In the meantime, the association of Nigeria producers (Man) has expressed a growing alarm on the position of the Nigeria Central Bank (CBN) supported for monetary policy, warning that the current interest rates regime is undermining the manufacturing base of the country and economic resilience.

In a declaration issued on Wednesday 21 May 2025, the general manager of Man, Segun Ajayi-Kadir, said that the CBN decision to keep the monetary policy rate (MPR) at 27.5 percent from November 2024 is not in step with global economic trends, where many nations are reducing interest rates to support growth and industrial recovery.

“We are troubled by the fact that when most of the progressive economies are tracing a course towards industrial recovery and macroeconomic stability, Nigeria’s monetary position tends to guide us in a different direction,” said Ajayi-Kadir. “In the last quarter, countries such as members of the euro area, the United Kingdom, Denmark, Australia, China, India, Thailand and Egypt, have implemented cuts in interest rates to support economic growth and support production sectors. However, our rigidity continues to create non -intentional consequences that could deepen the parliamentary performance of the production sector.”

Man’s advice

However, man’s key recommendations to the CBN include a significant cut in the reference interest rate; Political incentives for commercial banks to offer dealers’ interest rates and dealers to producers; the release of the stabilization fund of 1 trillion of ₦ in support of industries in difficulty; an increase in the capital base of the bank of the sector; and the resolution of $ 2.4 billion in Forex forward contracts in circulation to restore trust and access to essential imported inputs.

Ajayi-Kadir has also urged the government to provide a stable customs exchange rate for raw materials and industrial machinery, in order to prevent further inflationary impacts on the sector.

“Industrial trust is a fragile currency and once broken, it takes time to reconstruct,” he said. “Nigeria cannot afford to lose its manufacturing momentum at a time when the world is repositioning for the next wave of industrial transformation.”

He warned that, unless urgent measures are taken, the current monetary policy could undermine national economic resilience.

Need to maintain price stability

The CBN decision to hold stable rates marked his attention on maintaining price stability, supporting the economic recovery with caution.

Keeping current rates, the bank is giving space to existing policies to produce results before implementing further adjustments.

According to the MPC press release, the Committee underlined the importance of coordinated efforts between the tax and monetary authorities to support economic growth and manage inflationary pressure.

Market analysts suggest that any cuts in potential rates will depend on the inflation trends and the stability of the exchange rate in the coming months.

However, if inflation continues to moderate and the change market stabilizes, the CBN can consider a more accommodating policy position in the second half of the year.

It is important to note that Cortros Research analysts have provided that the MPC meeting will maintain the status quo on rates in the second meeting for this year.

Cortros, in a report, stated that from the last meeting of the MPC, the global economic panorama has grown more and more volatile and uncertain, mainly led by persistent commercial protectionist policies in the United States.

“In our opinion, the MPC is likely to take into account these developments, in particular the high global uncertainty and its negative implications for the stability of the Naira, despite a rate of real positive return, given the current inflation rate.

“In this context, we plan that the MPC will adopt a cautious position, leaving the monetary policy rate (MPR) unchanged, together to keep all the other political parameters in an attempt to anchor the inflation expectations and maintain the attractive of the Naira.”

Nasme’s socket

The National Association of Small and Medium Enterprises (Nasme) said that the private sector organized is not happy with the conservation of rates, stating that they expected that the rates were reduced to support local producers and small businesses owners.