…Highlights threats to fiscal revenues, budget execution

From Chinwendu Obienyi and Adanna Nnamani, Abuja

Despite the challenges, the Monetary Policy Committee held the MPR steady at 27.5 per cent, with Governor Yemi Cardoso attributing the naira’s resilience and balance of payments surplus to timely reforms and strong financial buffers.

Cardoso, who briefed journalists after the two-day MPC meeting in Abuja, said the decision to maintain the key interest rate was driven by the need to consolidate recent improvements in some key macroeconomic indicators, which were expected to support overall moderation in prices in the near to medium term.

These, he said, included the progressive narrowing of the gap between the Nigerian Foreign Exchange Market (NFEM) and the Bureau De Change (BDC) windows, a positive balance of payment position, and easing price of Premium Motor Spirit (PMS), adding that members were satisfied with the progressive moderation in food inflation and commended the government for implementing measures to increase food supply as well as stepping up the fight against insecurity in farming communities.

Cardoso, however, stated that the committee expressed deep concern over the weakening global oil market, attributing the decline in prices to increased output by non-OPEC producers and geopolitical uncertainties, especially around U.S. trade policies.

“The MPC noted with concern the recent decline in crude oil prices, largely due to higher production by non-OPEC members. This, coupled with uncertainties in global trade dynamics, particularly those stemming from US policy shifts, poses significant risks to Nigeria’s fiscal receipts and the implementation of the 2025 national budget. Thus, fiscal authorities have to strengthen current efforts at enhancing FX earnings from the gas, oil, and non-oil exports,” he stated.

The CBN Governor had earlier emphasised the need for fiscal authorities to adopt a prudent approach to budget execution and to intensify efforts at revenue diversification earlier in the year. He had said, “The risk to budget implementation due to falling oil prices cannot be overstated. We must accelerate non-oil revenue mobilization and improve efficiency in public spending.”

While acknowledging that the underlying inflationary pressures were driven by high electricity prices, persistent foreign exchange demand pressures, and other legacy structural factors, Cardoso said the MPC opted to hold the benchmark interest rate steady at 27.5 per cent while also retaining other key policy parameters.

Specifically, the asymmetric corridor was left at +500/-100 basis points around the MPR, the Cash Reserve Ratio (CRR) for deposit money banks at 50 per cent, merchant banks at 16 per cent, and the Liquidity Ratio at 30 per cent.

He revealed that real GDP year-on-year grew by 3.84 per cent in Q4 2024 as against 3.46 per cent in the preceding quarter owing to improvements in the oil and non-oil sectors, with the services sector being the major contributor, and added that the country’s external reserves increased by 2.85 per cent to $38.90 billion as at May 16, 2025, from $37.82 billion as of March 2025.

“This represents an import cover of 7.6 months for goods and services. The balance of payment also recorded a surplus of $1.10 billion in Q4 2024 compared with $4.21 billion in the preceding quarter on account of moderation in current account surplus,” Cardoso explained.

With the escalating global tensions between the U.S. and other trading partners, which sent the world into a frenzy, Cardoso highlighted that early reforms adopted by the federal government and macroeconomic buffers helped stabilize the naira and improve the country’s balance of trade surplus.

“You will find that various currencies of the world were under attack and having to defend themselves. However, relative to other countries, Nigeria came out very well equipped as we were able to ensure that our depreciation was very modest and the stability was a reflection of the measures we had taken prior to this time. If those actions had not been taken, I dare say that the results would have been disastrous for us, and so it is good we started these reforms early and stayed the course where we built buffers which were able to withstand shocks that came in,” he said.