CBN Holds Benchmark Interest Rate at 27% as Disinflation Continues

The Central Bank of Nigeria has kept its Monetary Policy Rate at 27 per cent, extending its cautious stance as inflation slows and financial indicators show signs of stabilisation. The decision, announced after the November meeting of the Monetary Policy Committee in Abuja, marks the fourth pause this year and underscores the Bank’s preference to allow previous tightening measures to fully filter through the economy.

CBN Governor Olayemi Cardoso said the committee opted for a hold despite the steady decline in inflation because price pressures remain elevated. Headline inflation eased to 16.05 per cent in October from 18.02 per cent in September, a seventh consecutive month of moderation. Core and food inflation also slowed, supported by improved food supply, tighter monetary conditions and relative fuel price stability. Cardoso described monetary stability as a foundation for investment and growth, insisting that policy consistency is central to rebuilding market confidence.

Alongside the rate hold, the MPC adjusted the asymmetric corridor around the benchmark to +50/-450 basis points, a step meant to discourage banks from keeping idle balances with the CBN and encourage more lending into the real economy. The liquidity ratio remains at 30 per cent, while cash reserve ratios for commercial banks, merchant banks and non-TSA public deposits were left unchanged in line with the Bank’s liquidity management framework.

One factor supporting the committee’s decision is the strengthening of Nigeria’s external position. Gross reserves have risen to $46.7bn, the highest level in about seven years, aided by increased portfolio inflows, improved export earnings, a more transparent FX regime and Nigeria’s removal from the FATF grey list. Cardoso said the FX market now records daily turnover of about $500m without frequent intervention and that the narrowing gap between the official and parallel market rates reflects increased confidence in the Bank’s reforms.

Despite these gains, the CBN warned that inflation risks persist. Rising domestic liquidity, global commodity uncertainties and food supply pressures could slow disinflation. Broad money supply increased to N119.04tn in October, driven largely by growth in net domestic assets and higher credit to government and the private sector. The Bank argued that maintaining the current stance will help anchor expectations while allowing earlier policy actions to continue moderating prices.

Cardoso also restated the Bank’s commitment to a more orthodox policy path, signalling an end to years of large intervention programmes. He said outstanding intervention loans have been reduced by N2tn but noted that unrecovered balances remain significant. The ongoing recapitalisation of the banking sector is another plank of the Bank’s strategy, with 16 banks so far meeting revised capital requirements.

The rate hold drew mixed reactions from analysts and business groups. Some, including investment managers, said they had expected a modest rate cut given the sustained easing of inflation. Others in the private sector argued that borrowing costs remain too high for manufacturers and small businesses, urging the CBN to consider reductions to support credit expansion. However, many acknowledged that the Bank’s cautious approach aligns with its inflation-targeting objectives and its effort to consolidate recent macroeconomic improvements.

The CBN maintains that its priority is to stabilise prices, support confidence in the FX market and strengthen policy coordination with fiscal authorities. With inflation still in double digits, the MPC said it will continue to rely on data before considering any shift towards easing.