CBN Expected to Maintain Tight Monetary Policy Through Most of 2025
Meristem Securities’ Projections on Monetary Policy
Meristem Securities, a leading asset management firm, has forecasted that the Monetary Policy Committee (MPC) of the Central Bank of Nigeria (CBN) will likely maintain a hold stance on the Monetary Policy Rate (MPR) for the majority of 2025. The projection was detailed in their recently released 2025 Full Year Outlook report.
Current Monetary Policy Landscape
1. MPR Trends:
• The MPR stood at 18.75% in January 2024 and was raised by a total of 8.75% to 27.50% by November.
• This marked an aggressive tightening policy aimed at curbing inflation.
2. Liquidity Measures:
• The MPC implemented additional liquidity measures, including raising the Cash Reserve Ratio (CRR) to 50.00% for deposit money banks and 16.00% for merchant banks.
• The asymmetric corridor was adjusted to +500/-100 bps, aligning market rates with the MPR and enhancing foreign investor confidence.
3. Inflation Management:
• These measures contributed to a moderation in money market growth rates and credit expansion, though credit to the government surged by 68.45% Year-to-Date (YtD) in 2024.
Expert Opinions on 2025
• Meristem Securities:
They anticipate a less aggressive monetary stance, supported by a potential moderation in inflation and CBN’s intent to evaluate the impact of prior policies. They project that:
• MPR will be held for most of 2025, with a possible shift to a dovish stance in Q4.
• A 100 bps rate hike may still occur in Q1 if inflationary pressures persist.
• CBN Governor Yemi Cardoso:
At a recent event, Governor Cardoso emphasized the ongoing battle against inflation, stating:
“Our tight monetary policy stance has altered the previous dire trajectory. Inflation remains high but shows encouraging signs of improvement. Adjustments will be made as inflation sustains a downward trend.”
Economic Implications
• For Businesses and Consumers:
Elevated interest rates will likely persist, increasing borrowing costs for businesses and households.
• For Investors:
Stable MPR aligns with foreign exchange stability and boosts investor confidence.
Conclusion
The CBN’s monetary policy approach for 2025 underscores a cautious balancing act between maintaining inflation control and fostering economic stability. While businesses face challenges from high interest rates, the prospect of a dovish shift later in the year could provide relief.
Meristem Securities’ Projections on Monetary Policy
Meristem Securities, a leading asset management firm, has forecasted that the Monetary Policy Committee (MPC) of the Central Bank of Nigeria (CBN) will likely maintain a hold stance on the Monetary Policy Rate (MPR) for the majority of 2025. The projection was detailed in their recently released 2025 Full Year Outlook report.
Current Monetary Policy Landscape
1. MPR Trends:
• The MPR stood at 18.75% in January 2024 and was raised by a total of 8.75% to 27.50% by November.
• This marked an aggressive tightening policy aimed at curbing inflation.
2. Liquidity Measures:
• The MPC implemented additional liquidity measures, including raising the Cash Reserve Ratio (CRR) to 50.00% for deposit money banks and 16.00% for merchant banks.
• The asymmetric corridor was adjusted to +500/-100 bps, aligning market rates with the MPR and enhancing foreign investor confidence.
3. Inflation Management:
• These measures contributed to a moderation in money market growth rates and credit expansion, though credit to the government surged by 68.45% Year-to-Date (YtD) in 2024.
Expert Opinions on 2025
• Meristem Securities:
They anticipate a less aggressive monetary stance, supported by a potential moderation in inflation and CBN’s intent to evaluate the impact of prior policies. They project that:
• MPR will be held for most of 2025, with a possible shift to a dovish stance in Q4.
• A 100 bps rate hike may still occur in Q1 if inflationary pressures persist.
• CBN Governor Yemi Cardoso:
At a recent event, Governor Cardoso emphasized the ongoing battle against inflation, stating:
“Our tight monetary policy stance has altered the previous dire trajectory. Inflation remains high but shows encouraging signs of improvement. Adjustments will be made as inflation sustains a downward trend.”
Economic Implications
• For Businesses and Consumers:
Elevated interest rates will likely persist, increasing borrowing costs for businesses and households.
• For Investors:
Stable MPR aligns with foreign exchange stability and boosts investor confidence.
Conclusion
The CBN’s monetary policy approach for 2025 underscores a cautious balancing act between maintaining inflation control and fostering economic stability. While businesses face challenges from high interest rates, the prospect of a dovish shift later in the year could provide relief.