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The Central Bank of Nigeria Monetary Policy Committee has retained the country’s interest rate at 27.50 percent in January, the same rate as in November last year amid inflation drops.

It also retained the Cash Reserve Ratio, CRR at 50 basis points and the liquidity ratio, LR, at 30 percent and the asymmetric corridor at +500/-100 basis points around the MPR; other monetary policy decisions were retained.

CBN Governor, Olayemi Cardoso disclosed this in a press briefing on Thursday after 299th MPC in Abuja.

The apex bank boss explained that the rate pause was necessary following the recent inflation decline, which dropped to 24.48 percent in January after the Consumer Price Index rebase.

“The members of the MPC unanimously agreed to retain the interest rate at 27.50 percent” he stated.

DAILY POST reports that this is the first pause in interest rate hikes since Cardoso took office in September 2023.

This comes as economists and financial experts have, in the last months, called for an interest rate pause.

The Centre for the Promotion of Private Enterprise has been championing a call for a pause in the nation’s interest rate hike.

Recall that on Tuesday, National Bureau of Statistics announced that Nigeria’s headline and food inflation rate dropped to 24.48 percent and 26.08 percent in January from 34.80 percent and 39.93 percent in December last year.

The�Central Bank of Nigeria�(CBN) has reviewed upwards the fees charged on Automated Teller Machine (ATM) withdrawals effective March 1.

In a circular, CBN Acting Director, Financial Policy & Regulation Department,  John Onojah, explained that the revised charges will address increasing operational costs and enhance the efficiency of banking services.

Under the new rules, customers withdrawing from their own bank’s ATMs (on-us transactions) will continue to enjoy free withdrawals.

However, withdrawals from on-site ATMs (ATMs located at bank branches) will incur an N100 fee per N20,000 withdrawn.

For withdrawals at ATMs belonging to other banks (Not-on-Us transactions), an N100 fee plus a surcharge of not more than N500 per N20,000 withdrawal will apply.

The CBN emphasized that the surcharge is the income of the “ATM deployer/acquirer and must be disclosed to consumers at the point of withdrawal.”

James Emejo from Thisday in Abuja

The Central Bank of Nigeria (CBN) has approved the release of the Nigerian Foreign Exchange (FX) Code as a guideline to the banking industry to promote ethical conduct of Authorised Dealers in the Nigerian FX market.

In a notice posted on its website yesterday, the apex bank further announced that the code would be formally launch on January 28, 2025, in Abuja.

In October 2024, the central bank announced the introduction of the Electronic Foreign Exchange Matching System (EFEMS), for Foreign Exchange (FX) transactions in the Nigerian Foreign Exchange Market (NFEM).

The new system was to be implemented not later than December 01, 2024, and preceded by a two-week test run in November.

The system seeks to enhance governance, and transparency and facilitate a market-driven exchange rate that will be accessible to the public.

The CBN further explained that the platform would further reduce speculative activities, eliminate market distortions and give the CBN improved oversight capabilities to effectively regulate the market.

The bank noted that authorised dealers would subsequently conduct all FX transactions in the interbank FX market on the EFEMS approved by the apex bank where transactions will be reflected immediately.

Authorised dealers were, therefore, required to comply with extant guidelines and regulations governing the FX market and ensure that all necessary documentation, training, and systems integrations were concluded ahead of the go-live date.

The central bank added that it would publish real-time prices and buy/sell orders data from the system, and in collaboration with the Financial Markets Dealers Association (FMDA), publish the rules for the EFEMS.

The Nigerian FX Code and revised Market Operating Guidelines for the Nigeria Foreign Exchange Market will also provide guidance to market participants.

The Naira recently appreciated against the dollar, closing at ₦1,567/$1 on December 5, 2024. This marks the third consecutive day of exchange rate appreciation since the Central Bank of Nigeria (CBN) launched the Enhanced Foreign Exchange Market System (EFEMS).

Whilst it is natural to be curious or even concerned when exchange rates fluctuate, it’s important to understand that exchange rate movements are often short-term and should not necessarily prompt hasty decisions.

However, reacting solely to short-term fluctuations can undermine your original investment strategy and lead to missed long-term gains.

Now, let’s break down what is happening and, most importantly, what it means for your investment strategy.

What’s driving the Rally?

The recent rally of the Naira against the U.S. Dollar can be attributed to several key factors which combined to improve the currency’s position in the market. One of the major drivers is Nigeria’s recent successful Eurobond issuance, the country raised $2.2 billion in U.S. Dollar-denominated bonds.

This influx of foreign capital from foreign portfolio investors has significantly increased the supply of U.S. Dollars in the market. These bonds are offered and settled in dollars which has contributed to enhance liquidity and strengthen the Naira’s position against the dollar, providing a more stable foundation for the currency.

Additionally, the Central Bank of Nigeria (CBN) has been strategically selling U.S. Dollars into the market. This move is part of the CBN’s broader effort to manage Nigeria’s dollar reserves while ensuring enough dollars are available to support the country’s economic activities.

By supplying more dollars in the market, the CBN aims to balance supply and demand for foreign currency, which has been critical in stabilising the exchange rate. Moreover, the CBN’s focus on spending Naira within Nigeria rather than exporting it to foreign markets has further helped stabilise the currency.

Another significant development is introducing the Enhanced Foreign Exchange Market System (EFEMS), which replaced the previous Investors & Exporters (I&E) window. The EFEMS platform enhances transparency and improves the price discovery process in the foreign exchange market. With more U.S. Dollars entering the system, this platform has made it easier for market participants to access foreign currency, which has been instrumental in narrowing the supply-demand gap and supporting the Naira’s appreciation.

Finally, the seasonal influx of dollars in December has also contributed to strengthening the Naira. This time of year traditionally sees an increase in the supply of dollars as Nigerians abroad send remittances home for the holiday season, and businesses import goods in preparation for the festive period. This regular inflow of dollars helps boost liquidity in the market, further contributing to the strengthening Naira.

Imagine you are in a car, driving down a long, winding road with no clear destination. The road ahead is riddled with bumps, sharp turns, and potholes, making every mile a test of endurance. For Nigerians, this journey mirrors their unending battle with inflation—the ever rising costs of things that make life an uphill struggle.

The Central Bank of Nigeria (CBN) has been behind the wheel, attempting to steer us safely through this uncertain terrain. This week, they pressed the accelerator again,�raising�the benchmark interest rate to 27.5% to regain control over rising inflation.

Why did CBN increase the rate again?

CBN Governor Yemi Cardoso announced that the Monetary Policy Committee (MPC) unanimously agreed to�hike�interest rates. The decision comes as inflation continues its relentless climb—not just year-on-year, but month-on-month as well. In October, inflation soared to 33.9%, a level not seen since 1996.

This price surge is mainly due to rising costs of food and fuel, coupled with a depreciating naira, which together are straining household budgets and squeezing business operations for many Nigerians.

At the same time, the naira has struggled this year, losing�46%�of its value against the dollar. This depreciation comes from efforts to let the currency float freely and address the ongoing dollar shortage. As a result, the cost of imports has soared, adding to Nigeria’s inflation problems.

But they have been increasing rates. Why is inflation still going up?

Despite the CBN’s repeated interest rate hikes, inflation in Nigeria continues to rise, and the naira remains under pressure. This raises a pressing question:�why isn’t it working?

Raising interest rates is a classic tool for controlling inflation, but it’s only one piece of a larger puzzle. By making borrowing costlier, the CBN aims to reduce spending and cool demand. However, Nigeria’s inflation is deeply rooted in structural problems that extend far beyond consumer behavior—problems that interest rate hikes alone can’t fix.

The core problem is�supply-side inflation, which is driving up the cost of living, particularly in essential areas like food and fuel. Much of Nigeria’s inflation is tied to rising food prices, which continue to climb sharply. Food inflation is particularly severe in urban areas, where supply chains are under more strain due to higher transportation costs and challenges in food preservation. As food gets more expensive in cities, the burden on consumers grows heavier.

To truly tackle inflation, the CBN’s monetary policy must work hand-in-hand with solutions targeting these underlying challenges. Key issues like the high cost of production—caused by a weakened naira, soaring fuel prices, and poor infrastructure—are making it more expensive for businesses to produce and transport goods. These structural problems cannot be solved by interest rate hikes alone, underscoring the need for broader, more comprehensive reforms.

What does this mean for you?

For most Nigerians, this means that the cost of living will remain high for the foreseeable future. With interest rates increasing, borrowing costs will increase, making loans and credit more expensive. While higher interest rates can lead to better returns on savings, inflation is still outpacing the benefits. This means the naira in your pocket is losing its purchasing power daily, especially for food and fuel.

According to the Central Bank of Nigeria’s (CBN) international payment�data, remittances in the first nine months of 2024, amounted to $1.54 billion, a 16.7% decline from $1.85 billion recorded in the same period in 2023. Remittances refer to amounts sent by individuals working abroad to support their families and loved ones in their home country.

The decline in remittances may be attributed to several factors, including a weak global economy, and a weak domestic currency. Over the last decade, remittance inflows played an important role in the Nigerian economy. Remittances help households with members in a foreign country to meet basic expenses such as education and healthcare. It is also an important source of foreign currencies and contributes to the country’s foreign exchange reserves.

Beyond substistence purposes, remittances are also channels into productive investments, in turn, bolstering economic growth. While the government might have limited influence on the global economy, government policies aimed at improving the domestic business environments could help reverse the declining trend of remittances.

According to the National Bureau of Statistics (NBS) Consumer Price Index (CPI) and Inflation�Report for October, headline inflation increased to 33.88%, from 32.70% in September, and 27.33% a year ago. The headline inflation surged due to rising food prices for commodities such as guinea corn, rice, and maize grains.Food inflation increased to 39.16% from 37.77% in September and 31.52% in October 2023.  �At the state level, Bauchi recorded the highest inflation rate at 46.68%, while Katsina had the lowest at 29.59%. Sokoto had the highest food inflation at 52.18%, while Rivers had the lowest at 33.87%.

The continuous rise in inflation could further worsen already weakened purchasing power. Unchecked high inflation might result in social unrest, as more Nigerians are unable to afford essential items they could buy a year ago. Hence, the government must tackle inflation head-on.

Food inflation can be reduced by addressing security concerns, increasing agricultural productivity and reducing post-harvest losses arising from poor storage infrastructure and weak transport networks.

According to the Central Bank of Nigeria’s October 2024 Business Confidence Survey, average capacity utilization fell by 4.3 percentage points to 51% down from 55.3% in the previous month.  Each sector of the economy exhibited varying levels capacity utilization. Mining and quarrying, electricity, gas, and water supplies had the highest levels of utilization in October at 57%, followed by manufacturing at 52%. Compared to the average installed capacity of 51%, the agriculture sector reported the lowest level of utilization at 48%, suggesting there is room to increase the sector output.

The low level of utilization is partly due to high interest rates, insecurity, complex tax structures, and inflation. These factors have all contributed to a less advantageous business environment, resulting in lower capacity utilization. Declined capacity utilisation signals a negative consequence on the economy which could result in output levels below potential and low export volumes. Low capacity utilization posits a challenge to the aspiration of the government to achieve a $1 trillion economy by 2030. Hence, the government needs to address the insecurity issue, prioritize infrastructure development and maintenance, lower the interest rate, and improve the efficiency of energy sources and alternatives.

This would mean that borrowing becomes costlier; the CBN also aims to use monetary policy rates to control inflation.

The Central Bank of Nigeria has increased monetary policy rate to 27.50% from the earlier 27.25% in which it was pegged.  This would mean that borrowing becomes costlier; the CBN also aims to use monetary policy rates to control inflation.  It is also aimed at ensuring that the naira becomes stronger.

According to a post on the official X account of the CBN, the bank voted to increase monetary policy rate by 250 points.  “The Monetary Policy Committee (MPC) Voted unanimously to raise Monetary Policy Rate (MPR) by 250 basis point from 27.25% to 27.50%” the statement read.

The CBN also voted to “retain Cash Reserve Ratio (CRR) at 50% for Deposit Money Banks and 16% for Merchant Banks.”  “The Committee also retains the Liquidity Ratio (LR) at 30% and Asymmetric Corridor at +500/-100 basis points around the MPR.” the apex bank posted.

The increase in monetary policy rates have failed to reduce the inflation in the country with general inflation and food inflation experiencing increase.  It is unclear if the CBN monetary policy rate does not affect government borrowings as state governments have continued to borrow increasingly from domestic sources.  The CBN have continued to insist that increasing monetary policy rates were vital to economic stability and recovery in the country.

According to the International Monetary Fund (IMF) in its October 2024 World Economic�Outlook, Nigeria’s inflation remains in double digits and exceeds targets in nearly half of the region. Although regional GDP-weighted headline inflation is expected to decline from 18.1% in 2024 to 12.3% in 2025 and will remain higher in oil-exporting countries like Nigeria. Projected fiscal consolidation is expected to improve the external sector, with the median current account deficit decreasing from 4.3% in 2024 to 3.7% in 2025.

However, oil exporters like Nigeria might see their current account surpluses narrow from 1.5% to approximately zero percent. Recent macroeconomic adjustments, such as reductions in fuel subsidies and increased exchange rate flexibility, have intensified short-term hardships.  �The IMF projects that Nigeria’s real GDP growth will increase from 2.92% in 2024 to 3.3% in 2025, while consumer price inflation is expected to decline from 32.5% to 25.0%. External debt is projected to increase from 22.7% of GDP in 2024 to 25.0% in 2025, and reserves are expected to increase to 7.2% of imports, up from 6.8%.

The government needs to put policies in place to curb inflation to ensure the decline projected is attained. Additionally, domestic resource mobilisation should be a priority to reduce the need for borrowing and increase fiscal expenditure.