As the Central Bank of Nigeria’s Monetary Policy Committee (MPC) begins its first meeting of 2025 today, there is more than usual interest in what is likely to be the outcome of the twoday gathering, given the consensus among analysts that inflation is likely to decline this year, writes Tony Chukwunyem
Although meetings of the Cen – tral Bank of Nigeria’s (CBN) Monetary Policy Committee (MPC), like gatherings of similar committees all over the world, naturally attract a lot of attention, the circumstances leading to the first meeting of the MPC this year, which commences today in Abuja, make it even more worthy of attention than usual.
Rebased CPI, GDP data
Of course, there is the fact that the MPC’s first meeting of 2025 was initially slated to hold in January, but was shifted to February 17 and 18, a move, analysts said, was designed to allow the members of the Committee to consider new rebased Gross Domestic Product (GDP) and Consumer Price Index (CPI) data that the National Bureau of Statistics (NBS) had said would be released at the end of January.
But with the NBS not releasing the rebased data at the end of last month, as was widely expected, there were speculations that the CBN was going to shift the MPC meeting to sometime in March.
However, last Monday, the apex bank announced that the MPC meeting will now be held on Wednesday, February 19 and Thursday, February 20, 2025.
Expectedly, ahead of the meeting, financial experts have been expressing their views about the most likely outcome of the MPC meeting which ends tomorrow.
Projections
In a recent report, for instance, analysts at Financial Derivatives Company (FDC) Ltd, citing lower inflation and positive real Gross Domestic Product (GDP) growth, predicted that the MPC is likely to leave the benchmark interest ratethe Monetary Policy Rate (MPR) unchanged at 27.25 percent.
As the analysts put it, “lower inflation and positive real GDP growth will reinforce the MPC’s decision to maintain a status quo.” They, however, said they expect “policy easing by mid-2025 as inflation moderates.”
Further commenting on inflation in their latest report released over the weekend, the FDC analysts said: “Inflation is projected to moderate slightly in January, supported by base effects and the fading impact of the PMS price increase.
“FDC projects the inflation rate to drop to 33.35 per cent in January 2025 from 34.8% in December 2024, using the old methodology.
However, risks to inflation remain on the upside, with the proposed 50 per cent tariff hike for telecom services, food supply disruptions, and global economic uncertainties, keeping prices sticky downwards in the near term.”
For their part, analysts at Coronation Merchant Bank, in a report released before the CBN rescheduled the MPC’s meeting for January, stated: “We expect the CBN’s monetary policy to remain tight going into 2025, with the possibility of small (25 basis point) rise in the MPR at the January and March meetings of the Monetary Policy Council (MPC).
“We doubt that the CBN will implement an inflation-plus Monetary Policy Rate in 2025 (or at least not until the very end of 2025) but we think that it will continue to use a high MPR in conjunction with market interest rates, combined with continued reversal of ways and means loans and tight liquidity conditions for banks.”
In addition, the analysts said: “Our opinion is that Nigerian inflation is likely to ease in the second half of 2025 and that this will give the CBN the justification to cut the MPR.
Our base case (65% probability) is for the MPR to be cut to 24.00 per cent by the end of 2025. “Our optimistic scenario (25% probability), which supposes that the CBN will be able to bring about naira appreciation against the US dollar in 2025, thereby contributing to a rapid fall in inflation, is that the MPR can be cut to 18.00 per cent by year-end.
“In our pessimistic scenario (10% probability) we see the CBN abandoning its assault on inflation and cutting rates steeply in order to encourage growth. In this pessimistic scenario we see the MPR being cut to 12.0 per cent by year-end.”
Cardoso’s pledge
Interestingly, CBN Governor, Mr. Olayemi Cardoso, has always responded to criticism of the tight monetary policy stance that the apex bank adopted throughout 2024, which saw it raising the MPR by 875 basis points to 27.5 per cent, was principally aimed at curbing inflation.
For instance, in his address at the Chartered Institute of Bankers of Nigeria’s (CIBN) 59th Annual Bankers’ Dinner, held in Lagos on November 29, last year, Cardoso stated: “Upon assuming office in October 2023, we prioritized reforms to rebuild Nigeria’s economic buffers and strengthen resilience.
Inflation, which had surged to 27per cent, was one of the most pressing challenges, partly driven by excessive money supply growth.
“While our GDP growth had stagnated at a meagre 1.8 per cent over the previous eight years, money supply expanded rapidly, averaging
While these measures were intended to cushion immediate shocks, they did not translate into commensurate productivity growth, fueling inflationary pressures and heightened foreign exchange volatility
about 13 per cent growth annually. This imbalance not only fueled inflation but also contributed to a significant depreciation of the naira.
“The nation was also grappling with a fiscal crisis, marked by unsustainable deficit financing through the Central Bank’s Ways and Means advances, which had reached an unprecedented N22.7 trillion by 2023—equivalent to almost 11 per cent of our GDP.
“In addition, quasi-fiscal interventions by the CBN, totaling over N10 trillion, undermined market confidence and weakened the effectiveness of our policy tools.
These actions shifted focus away from our primary responsibility—maintaining price stability. They compromised transparency by bypassing essential oversight mechanisms, which are vital for accountability.
Moreover, they strained monetary stability, contributing to inflationary pressures and market distortions.” Continuing, he said: “Under my leadership, we have taken decisive steps to move away from these practices.
We have ended years of fiscal deficits financed through CBN’s Ways and Means advances, reinforcing our commitment to price stability and promoting fiscal discipline.
“To tackle the pressing challenge of inflation, the CBN acted decisively by raising the Monetary Policy Rate by 875 basis points to 27.5 per cent in 2024—an essential move to contain inflation and restore stability.
Our tight monetary policy stance has altered the previous dire trajectory, and we expect a downward trend in 2025.
“Inflation remains unacceptably high, but the signs are encouraging, particularly given that the full effects of monetary policy typically take 6-9 months to impact the consumer sector.
Our commitment is unwavering: we will prioritize price stability until its benefits are felt by every Nigerian.”
In fact, in his address at the 2025 Monetary Policy Forum held on January 30, Cardoso announced that but for the CBN’s orthodox monetary policy approach, headline inflation would have reached 42.81 per cent in December 2024 compared with the 34.80 per cent that was reported for the month by the National Bureau of Statistics (NBS).
According to him, the 42.81 per cent headline inflation projected for December was the CBN’s counterfactual estimate, which did not happen because the apex bank maintained its tight monetary policy stance.
Stressing that inflation is a major threat to the economy which erodes purchasing power, discourages investment and worsens inequality, Cardoso pledged that the regulator would continue to shift from unorthodox to orthodox monetary policy orthodox as he believed that the economy had turned the corner and that disinflation was within reach this year.
He noted that throughout 2024, the CBN implemented bold policy measures across six MPC meetings.
These included raising the MPR by a cumulative 875 basis points to 27.50 per cent; increasing the Cash Reserve Ratio (CRR) of Other Depository Corporations (ODCs) by 1750 basis points to 50.00 per cent and adjusting the asymmetric corridor around the MPR.
Specifically, the CBN Governor stated: “The past year presented significant challenges, including persistent inflationary pressures exacerbated by global and domestic shocks.
Despite these headwinds, our commitment to price and monetary stability has yielded measurable progress. We have seen relative stability in the foreign exchange market, a narrowing of exchange rate disparities, and a rising external reserves of over $40 billion as of December 2024.
“Domestic structural challenges, exchange rate pass-through effects, and energy price adjustments continue to exert pressure on prices and economic activity.
At the same time, we recognise that while structural factors play a significant role in Nigeria’s inflationary challenge, monetary dynamics have also contributed to price pressures.
“The liquidity injections associated with unorthodox monetary policies particularly created a significant overhang.
While these measures were intended to cushion immediate shocks, they did not translate into commensurate productivity growth, fueling inflationary pressures and heightened foreign exchange volatility.
“Excess naira liquidity in the system has amplified demand-driven inflation, further exacerbated by supply-side constraints stemming from structural deficits.
These dynamics underscore the importance of a disciplined and coordinated approach to monetary policy to restore stability.”
He further stated: “Encouragingly, the results are becoming evident—FX liquidity is improving fostering greater stability in the market.
The naira is gradually aligning with market fundamentals, creating a more predictable environment for domestic production, exports, and essential imports.
While challenges remain, we are confident that our policies are setting Nigeria on the path to sustainable economic stability.
“As we shift from unorthodox to orthodox monetary policy, the CBN remains committed to restoring confidence, strengthening policy credibility, and staying focused on its core mandate of price stability.”
Conclusion
While the consensus among financial analysts, over the weekend, was that CBN’s policy measures are beginning to yield results and that inflation will likely begin to decelerate this year, industry watchers point out that effective coordination with the fiscal authorities will be critical to ensuring that the apex bank achieves its objectives.
