In brief
- The CBN opts for continued caution over rate calibration. As anticipated in our May 2025 MPC update, Nigeria’s Central Bank held the policy rate steady at 27.5% during its July 2025 MPC meeting, aligning with market expectations. The Committee also left all other monetary parameters unchanged in a cautious resolve to anchor the emerging disinflation.
- Staying the policy stance will ensure progress on emerging disinflation. In our view, the inter-meeting inflation data ahead of the July MPC meeting delivered mixed signals. Annual inflation fell for two consecutive months to 22.2% in June while core inflation went up to 22.76% during the June print. We believe the mixed inflation signal reinforced the case for holding the policy stance to consolidate the disinflation trend.
- Authorities are bullish on continued disinflation but signalled caution ahead. Without providing specific rate guidance, the MPC noted that its latest projections indicate further disinflation in the months ahead, supported by current tight monetary stance, stable FX, declining petrol prices and moderation in food prices. We view the decision by Dangote refinery to cut petrol prices for the domestic market and the recent Naira rally over the past 3-months as favourable for the disinflation outlook. Nonetheless, we think the rise in core inflation highlights lingering underlying pressures, which will reinforce the MPC’s cautious stance until inflation risks abate and the real policy rate rises meaningfully above the current level of 5.3%.
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