The Monetary Policy Committee (MPC) of Nigeria recently announced its decision to maintain all policy parameters unchanged at the second meeting of the year. This decision was reached unanimously by the committee members. Abdulazeez Kuranga, Regional Economist for West Africa at Standard Bank Group, provided insights into the implications of this decision in a recent interview with CNBC Africa. Abdulazeez Kuranga highlighted two key factors driving the MPC's decision. Firstly, he emphasized the need for clarity on inflation numbers despite some moderation in the figures. The month-on-month inflation rates are still significant and volatile, leading the CBN to exercise caution before making any major adjustments. Secondly, concerns surrounding the external environment, particularly lower prices affecting external and fiscal accounts, are influencing the decision-making process. The CBN aims to maintain confidence and trust in its reforms, hence the cautious approach to policy changes. Kuranga noted that while headline inflation is showing signs of moderation, the month-on-month movements remain unclear. He cited historical instances where significant events triggered substantial inflation spikes, which are not currently evident. Factors such as stable exchange rates and relatively controlled food prices suggest a potential path towards inflation moderation. The Central Bank highlighted positive indicators such as the narrowing gap between the NIFR and BDC windows, a favorable balance of payments position, and easing payment pressures. Kuranga linked these improvements to the relative stability in exchange rates and food prices compared to the previous year's inflationary pressures. These factors suggest a potential moderation in headline inflation. However, the MPC remains cautious about declining crude oil prices and underlying inflationary pressures driven by electricity costs and demand factors. Kuranga warned that potential increases in electricity prices, alongside sustained oil price declines, could pose risks to inflation and foreign investor sentiments. With oil exports constituting a significant portion of Nigeria's revenues and FX reserves, any downward trend in oil prices could lead to negative implications for the currency. When asked about the possibility of real interest rates turning positive in the near future, Kuranga acknowledged that from the NPR perspective, rates remain positive. However, market rates are subject to various selling pressures, warranting a cautious approach. In conclusion, the MPC's decision to keep rates unchanged reflects a prudent stance amidst uncertainties in the global and domestic economic environment. While positive indicators suggest a potential moderation in inflation, risks from declining oil prices and rising electricity costs remain notable concerns. The CBN's commitment to building confidence and trust underscores its deliberate approach to policy formulation and reinforces the need for vigilant monitoring of key economic indicators.