The Central Bank of Nigeria (CBN) has opted to maintain its tight monetary stance, leaving key policy rates unchanged during its July Monetary Policy Committee (MPC) meeting.
The Monetary Policy Rate (MPR) stays at 27.5%, with the Cash Reserve Ratio (CRR) at 50%, Liquidity Ratio at 30%, and the asymmetric corridor at +500/-100 basis points.
The CBN defended the decision as necessary to consolidate gains in the fight against inflation, which eased to 22.22% in June 2025 from 22.97% in May, according to the National Bureau of Statistics (NBS).
Despite this marginal decline, economists are voicing growing concern that the CBN’s rigid policy framework is exerting undue pressure on the real economy.
“Nigeria’s inflation is overwhelmingly cost-push, not demand-driven,” said Professor Chiwuike Uba, a public finance expert. “High interest rates won’t resolve the structural drivers of inflation like food insecurity, energy costs, and currency volatility.”
Uba criticized the high 50% CRR—the steepest in Sub-Saharan Africa—as a constraint on banks’ lending capacity, warning that credit-starved sectors like agriculture and manufacturing are buckling under rising costs.
He also noted that most Nigerians and small businesses operate outside formal credit systems, meaning rate hikes have little influence on consumption but severe consequences for production and investment.
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With borrowing costs soaring above 30% for businesses, economic expansion is faltering. Nigeria’s GDP growth slowed to 2.98% in Q1 2025, down from 3.46% in the previous quarter, while key sectors remain under pressure from high input costs and currency instability.
“While inflation numbers look better, the underlying conditions haven’t improved,” Uba said, calling the decline “a seasonal dip, not a structural gain.”
Other African economies offer a contrast. Kenya’s benchmark rate stands at 13% with single-digit inflation, and Ghana has begun rate cuts despite inflation nearing 21%. Egypt, meanwhile, is blending moderate tightening with strategic support to key sectors.
Uba urged Nigerian authorities to rethink their approach: “Stability must not become inertia. Lowering the CRR, supporting productive sectors with concessional loans, and improving policy coordination is urgent.”
Without a policy shift, he warned, Nigeria risks stabilizing inflation data at the cost of strangling real economic activity.