The inaugural Monetary Policy Committee (MPC) meeting of the Central Bank of Nigeria (CBN) in 2025 revealed important insights into the country’s economic path. The CBN underlined its commitment to maintaining foreign exchange (FX) market stability, lowering inflation, and accelerating economic recovery through a well-coordinated monetary and fiscal policy approach.
Several policy actions have produced tangible outcomes over the previous two years, including improved exchange rate convergence, better investor confidence, and an increase in Nigeria’s Gross Domestic Product (GDP).
Despite these excellent developments, difficulties persist. While inflation is showing indications of stabilization, it remains far higher than the single-digit target, and fundamental economic constraints remain.
The recent MPC meeting emphasized the importance of long-term reforms, improved fiscal-monetary policy coordination, and ongoing engagement with stakeholders in order to consolidate the gains made thus far, particularly exchange rate stability and market convergence, which industry observers regard as key achievements.
One of the most important recent triumphs has been the increasing stability of Nigeria’s foreign exchange market. The CBN’s deliberate policy actions have reduced the difference between the official Nigerian Foreign Exchange Market (NFEM) rate and the Bureau de Change (BDC) parallel market rate.
Previously, this gap was a major source of anxiety for investors and businesses, leading to speculative activity and market distortions.
Economic analysts, like Bismarck Rewane, managing director of Financial Derivatives Company, praised the CBN’s efforts. Rewane stated on an Arise Television interactive program in a post-MPC study, “The spread between the official and parallel market rates has reduced to less than 1%. It was once as high as 10, 15, and 20%. This is a clear indicator that the policies are effective.
The Nigeria Foreign Exchange Code and the Electronic Foreign Exchange Matching System (B-Match) are crucial to this exchange rate convergence. These initiatives have increased transparency, improved price discovery methods, and eliminated shady market actors such as Aboki FX which previously influenced parallel market rates.
In February 2025, the Naira traded for ₦1,503.63 per dollar in the official market and ₦1,500.00 in the parallel market.
According to Rewane, the Naira’s fair value is ₦1,102.15 per dollar based on a Purchasing Power Parity (PPP) study, indicating a 26.35% undervaluation. He highlighted that intervening to protect an overpriced currency is harmful. However, if you interfere to support an undervalued currency, you are bringing it back into alignment. That is what the CBN is doing, and we commend them.
In addition to currency rate management, higher oil production—1.54 million barrels per day (mbpd) as of January 2025—has boosted Nigeria’s current account balance. This has helped strengthen external reserves,currently $39.4 billion, providing 9.6 months import cover for goods and services.
Despite advances in stabilizing the foreign exchange market, inflation remains a serious worry. According to the most recent National Bureau of Statistics (NBS) data, Nigeria’s headline inflation rate was 24.48 percent (year on year) in January 2025, with food inflation at 26.08 percent and core inflation at 22.59 percent.
The CBN has implemented a number of monetary policy tools to reduce inflationary pressures. These include raising the monetary policy rate (MPR) and improving monetary policy transmission mechanisms.
However, structural concerns such as high import costs, insecurity in agricultural regions, and supply chain disruptions continue to drive up inflation. Many people have urged the federal government to use both kinetic and non-kinetic ways to combat instability in the country.
Umeje Chukwuma, like Rewane, noticed that rising food prices are one of the leading causes of inflation. He stated that “Food inflation remains stubbornly high due to factors such as insecurity, logistical bottlenecks, and climate-related challenges affecting agricultural output.” Unless these challenges are addressed, reducing inflation down to a single-digit level will be difficult.”
The MPC has underlined that better collaboration between monetary and fiscal authorities is vital to attaining inflation control.
The recently finished monetary policy forum emphasized the importance of targeted fiscal interventions, such as increased expenditures in agricultural infrastructure, improved security measures for rural communities, and incentives to encourage local production.
The government’s attempts to restrict imports and boost domestic production have also helped to keep inflation under control. The MPC stated that Nigeria’s trade balance has greatly improved, with a current account surplus of $6.06 billion as of Q3 2024, indicating a decrease in import dependence and an increase in export profits.
Nigeria’s economy has proven resilient, with GDP growth above projections. According to the NBS, GDP increased by 3.84% year on year in Q4 2024, up from 3.46% in Q4 2023. The services sector drove this rise, increasing by 5.37% and accounting for 57.38% of total GDP.
Financial analysts say Nigeria’s efforts to diversify its economy beyond oil are beginning to yield results. The service, telecommunications, and fintech industries has seen significant expansion that helps offsets some weaknesses in the oil sector.
Dr. Ayo Teriba, CEO of Economic Associates, stated, “Nigeria’s economy is diversifying, but growth remains fragile.” The oil sector remains important, and variations in global oil prices or production setbacks may have an impact on macroeconomic stability.”
While Nigeria’s recent macroeconomic achievements are impressive, their long-term durability remains uncertain. Experts have identified many factors that could influence economic outcomes in the following months:
The robustness of Nigeria’s foreign reserves and FX market stability are inextricably linked to global oil prices. Any dramatic decrease in oil prices might reverse recent gains, putting additional pressure on the Naira.
Poor infrastructure, inadequate electricity supply, and vulnerability in the agriculture sector continue to be major impediments. Without addressing these constraints, inflation control and long-term growth could be difficult to sustain.
Many experts believe policy implementation will be a critical predictor of success. Rewane underlined the importance of continuity, adding, “Frequent policy reversals create uncertainty and discourage investors.” The CBN must guarantee that its foreign exchange and monetary policies remain predictable and transparent.”
The growth of non-oil industries, particularly industry, agriculture, and technology, would be critical to lessening Nigeria’s reliance on oil earnings. Dr. Teriba went on: “Policymakers must continue to support the growth of value-added industries to ensure sustainable economic diversification.”
The MPC meeting underlined the CBN’s commitment to achieve exchange rate stability, moderate and long-term economic recovery.
However, MPC and experts share the belief that achieving a single-digit inflation rate and long-term economic resilience will require a balanced approach that includes: maintaining the reforms that have enhanced price discovery and investor confidence; addressing insecurity and infrastructural deficits to support local production; and deepening Fiscal-Monetary Policy Coordination – Ensuring that both arms of policy work in harmony to address inflation and macroeconomics.
Some argue that Nigeria should actively encourage foreign and local investment by creating a conducive climate for businesses and investors to prosper.
While Nigeria’s economic outlook has improved, continuous policy initiatives and long-term strategic planning will be critical for consolidating these gains and guaranteeing stability in the coming years.
