Analysts expect CBN to hold MPR for most of 2025

• Analysts expect the Central Bank of Nigeria to hold the Monetary Policy Rate for most of 2025
• The expectation is because of an anticipated moderation in inflation during the year
• The CBN hiked the MPR six times and introduced other liquidity management measures in 2024

Analysts at asset management firm, Meristem Securities, say the Monetary Policy Committee (MPC) of the Central Bank of Nigeria (CBN) may maintain its stance on the Monetary Policy Rate (MPR) for most of 2025.

In the firm’s recently released 2025 Full Year Outlook, it stated that the projection is because of an expected moderation in inflation during the year.

Meristem Securities further noted that it cannot rule out the possibility of a 100 basis points increase in the MPR during the first quarter of the year.

It said, “Looking ahead, we see the potential for a less aggressive monetary policy stance, particularly as the monetary authority has hinted at its intention to evaluate the impact of prior policy measures.

“This outlook is further supported by our expectation of modest moderation in inflation during the year.

“Given the risk that premature easing could reverse the progress made in 2024 and exacerbate inflationary pressures, we expect the MPC to maintain a HOLD stance for most of 2025.

“A shift to a more dovish position may occur in the final quarter of the year. While unlikely, we cannot entirely rule out the possibility of an additional 100 bps hike in the MPR during the first quarter of 2025.”

CBN introduced liquidity management measures in 2024

The CBN increased the MPR six times in 2024, from 18.75 per cent in January 2024 to 27.50 per cent in November, an 8.75 per cent increase during the year.

The MPC equally introduced liquidity management measures in addition to rate adjustments, which include raising the cash reserve ratio (CRR) to 50.00 per cent for deposit money banks and 16.00 per cent for merchant banks.

Adjustments were also made to the asymmetric corridor to +500/-100 bps from the initial range of +100/-300 bps around the MPR.

These liquidity management policies, according to Meristem Securities, showed a positive impact as the growth in money market indicators declined compared to previous years.

For instance, broad money supply (M3) increased by 15.17 per cent year-to-date (YtD), compared to 41.14 per cent in 2023, while credit to the private sector dropped by 0.68 per cent YtD, indicating the impact of a higher interest rate environment on the real economy.

CBN maintained a hawkish stance in 2024 to curb inflation

In 2024, the CBN severally said it would maintain a tight monetary stance to curb surging inflation.

At the annual Bankers Dinner held in Lagos last year, CBN governor, Olayemi Cardoso, stated that the apex bank’s measures will not be permanent.

He said the bank was closely monitoring the data, and as inflation improves, it will adjust rates accordingly, saying a downward trajectory is expected in 2025.

However, it appeared inflation defied the CBN’s measures as it soared in 2024, surpassing a 28-year high four times in the year, and settled at 34.60 per cent in November 2024.

Experts project naira, FX stability, MPR, inflation decline, fuel price slash, others in 2025

Meanwhile, TheRadar earlier reported that experts projected some of the economic realities that will shape 2025.

These include stability of the naira and the foreign exchange (forex) market, decline in the Monetary Policy Rate (MPR) and inflation rate, reduction in fuel price, and growth of other economic indicators.