CBN Raises MPR to 26.25% in Aggressive Inflation Fight

The Central Bank of Nigeria's Monetary Policy Committee (MPC) voted unanimously at its May 2025 meeting to raise the benchmark Monetary Policy Rate (MPR) by 50 basis points to 26.25%, marking the fifth consecutive rate hike in an aggressive campaign to tame inflation that has persistently hovered above 30%.

Governor Olayemi Cardoso, addressing journalists in Abuja, described the decision as a 'necessary and calibrated response' to inflationary pressures driven by food prices, foreign exchange volatility, and energy costs following the removal of fuel subsidies. He stressed that the CBN remains committed to its price stability mandate above all other considerations.

The implications for commercial banks are significant. Lending rates, already elevated at an average of 29–32% for prime borrowers, are expected to rise further, squeezing credit access for small and medium enterprises that form the backbone of the Nigerian economy. Analysts at Stanbic IBTC Research warned that the hike could depress loan growth in the second half of 2025.

However, deposit rates have responded positively, with several Tier-1 banks raising their 90-day fixed deposit rates above 20% for the first time in over a decade. This has drawn funds away from equity markets and into bank deposits, a trend analysts describe as a 'flight to yield.' Treasury bill rates also spiked to 22% at the latest auction, oversubscribed by a factor of three.

Economists are divided on the effectiveness of the CBN's hawkish stance. Proponents argue that the rate hikes have begun to moderate core inflation and stabilise the naira on parallel markets. Critics, however, point out that Nigerian inflation is largely supply-side in nature — driven by road insecurity disrupting food logistics and high diesel costs — making demand-side monetary tools a blunt instrument. The MPC's next meeting is scheduled for July, where markets expect another 25 basis point adjustment unless headline inflation prints below 28%.