Tracking the CBN’s Single-Digit Benchmark Plan

The Central Bank of Nigeria (CBN) is targeting a single-digit inflation rate through a cautious and steady monetary policy stance. Governor Yemi Cardoso at the recent Monetary Policy Committee (MPC) meeting made a clear statement about the target and outlined the bank’s methods.

It plans to keep key policy rates steady. The CBN has decided for the third consecutive time that the Monetary Policy Rate (MPR) remains at 27.5%. Keeping the MPR steady signals a commitment to controlling inflation without disrupting economic growth abruptly.

This consistent stance is intended to sustain the ongoing downward trend in inflation.

Retaining the asymmetric corridor is its next major move. The bank maintains the asymmetric corridor around the MPR at +500/-100 basis points, which regulates the interest rates commercial banks charge. More so, this corridor helps manage liquidity in the banking system, thereby controlling inflationary pressures.

High cash reserve ratio (CRR) is also a part of the plan. The CRR remains high, at 50% for commercial banks and 16% for merchant banks. This means banks must keep a large portion of their deposits with the CBN, limiting excess money supply in the economy, which is inflationary.

The plan further includes keeping liquidity ratio unchanged. The liquidity ratio is held at 30%, ensuring a controlled but adequate flow of funds in the economy to avoid excess liquidity fueling inflation.

Governor Cardoso also stressed the MPC’s commitment to sustaining disinflationary momentum.

This means continuing the downward trend from recent inflation rates (from 22.97% in May to 22.22% in June), although recognizing the battle against inflation is not yet over.

The bank is keeping its eyes on the economy, while getting ready for adjustments. It said it is committing to rigorously monitoring economic trends and maintaining flexibility to adjust policies as necessary. This would help it achieve long-term economic stability and the inflation target.

The MPC emphasized its dedication to the bank’s price stability mandate, vowing to deploy all necessary measures to foster economic confidence and stability.

The policy will be reviewed in the upcoming meeting. The next MPC meeting is scheduled for late September 2025, suggesting continuous assessment and policy calibration.