Economy
MPC: FG fights inflation as CBN mops up N5trn
Efforts by the Federal Government to curb the rising inflation will lead to N5 trillion cash mop up from the banking industry as the Central Bank of Nigeria, CBN implements the hike in banks’ Cash Reserve Ratio, CRR to 45 per cent.
The CRR which represents banks’ cash reserves for purposes of meeting cash obligations on demand was moved from 32.5 percent to 45 percent in apparent bid to curtail inflation.
Meanwhile, Financial Vanguard learnt that the apex bank is now working with some foreign portfolio investors, FPIs, to address concerns over recent reforms introduced in the foreign exchange market as well as the 400 basis points hike in the Monetary Policy Rate, MPR.
This is one of the outcomes of a virtual meeting, tagged Foreign Portfolio Investors Call, organised in collaboration with NGX Group, which was addressed by the CBN Governor, Mr. Olayemi Cardoso, Deputy Governor, Economic Policy, Mohammad Abdullahi, and moderated by the Group Managing Director/ CEO of NGX Group, Mr. Temi Popoola.
While speaking at the meeting with FPIs in response to inquiries about the impact of the hike on banking system liquidity, CBN Deputy Governor Abdullahi said that the banking system has a shortfall of N5 trillion to meet the 45 per cent CRR.
He, however, said that the apex bank will not debit the banks N5 trillion at once adding that the apex bank will implement the new CRR in a way that will not be disruptive to the industry. He disclosed prior the MPC decision, the effective CRR for the industry was close to 40 per cent.
He added some banks already have surpassed the 45 per cent CRR and they would be refunded the excess while banks with shortfall will have build up their cash reserves. Excess liquidity The estimated N5.0trillion which represented the outstanding system liquidity in excess of the initial CRR range is expected to impact the liquidity of many banks adversely.
Financial Vanguard learnt the decision to tighten came against the backdrop of deanchored inflationary trend which rose to 29.9 percent yearon- year, the highest since return to democracy in 1999. But financial analysts project the inflation rate would remain elevated in the near-term amid persisting exchange rate pressure, rising energy cost, and sustained fiscal imbalances.
In defending the huge jump in MPR and CRR, the CBN Governor, Yemi Cardoso, highlighted the disruptive impact of deficit financing to the Federal Government by Ways & Means, and also the direct intervention of the apex bank in the real sector which is estimated in excess of ¦ 10.0 trillion.
He also noted the structural inefficiencies within the foreign exchange market, and the need to collaborate strongly with fiscal authorities to effectively manage non-money factors. Analysts’ recommendations Commenting on this development, analysts at Afrinvest West Africa, a Lagos based investment house, said: “We suggest that in addressing inefficiencies, the apex bank prioritises the use of policy to minimise distortions and should remain focused on improving supply rather than countering the symptoms of illiquidity.
“In assessing impact on markets, we anticipate an immediate and strong bearish repricing of fixed-income yields especially on short-dated bills. “Furthermore, expectations of higher interest environment over the near-term coupled with liquidity squeeze amid costlier Standing Lending Facility (SLF) access should strengthen bearish sway”.
Free entry, exit for FPIs Meanwhile, Cardoso assured the FPIs of free entry and exit from the forex market. He added that the focus of the apex bank is to ensure stability of the exchange rate and ensure reasonable price discovery.
He also reiterated commitment of the CBN to achieving price stability adding that the MPC members are unanimous on the need to tame rising inflation and the 400 basis points hike in MPR is a strong signal to this effect. Cardoso assured the FPIs on policy consistency adding that the various measures introduced by the CBN in the forex market were product of extensive debate and strong conviction that is the right direction to go.
Higher interest rates in TBs Speaking further at the meeting, Abdullahi assured the FPIs the CBN will from today review upward interest rate on Treasury bills, TBs, in tandem with the hike in MPR. He further disclosed that from today, the CBN will increase frequency and size of Open Market Operations, TBs, to expedite liquidity mop up and provide instruments for FPIs to invest.
Volvo Group has announced plans to lay off up to 800 workers at three of its U.S. facilities over the next three months, citing ongoing market uncertainty and declining demand exacerbated by tariffs introduced under the administration of President Donald Trump.
The affected locations include the Mack Trucks plant in Macungie, Pennsylvania, as well as Volvo Group sites in Dublin, Virginia, and Hagerstown, Maryland.
In a statement on Friday, Volvo Group North America confirmed that between 550 and 800 employees would be impacted.
The company, a subsidiary of Sweden’s AB Volvo, employs nearly 20,000 people across North America.
The layoffs come amid wider turmoil in the automotive and manufacturing sectors, as shifting U.S. trade policy and a series of tariffs continue to drive up production costs. Economists have pointed to the uncertainty surrounding Trump’s trade strategy as a factor undermining both business and consumer confidence, with concerns mounting over a potential economic slowdown or recession.
According to Volvo, the company is grappling with a decline in heavy-duty truck orders, driven by instability in freight rates, anticipated regulatory changes, and the growing financial burden of tariffs. “We regret having to take this action, but we need to align production with reduced demand for our vehicles,” a company spokesperson stated in an email quoted by Reuters.
Volvo’s announcement marks another blow to an industry already navigating a complex web of supply chain challenges and fluctuating market conditions, with other manufacturers also warning of potential cost hikes and disruptions tied to global trade disputes.
Inflationary pressure has reappeared as Nigerians grapple with increases in average costs of basic food items and energy.
For the first time after the rebasing of the Consumer Price Index (CPI), headline inflation spiked in March to 24.23 per cent – 105 basis points above the 23.18 per cent recorded in the previous month.
The National Bureau of Statistics (NBS) yesterday indicated that the rate of increase in the average price level was higher in March than the level in February.
In January, the NBS updated the weight and price reference periods in calculation of the CPI to make the inflationary gauge more reflective of changes in consumption patterns and the economy generally.
The rebasing did not only brought the base year closer to the current period from 2009 to 2024, it also introduced some critical methodology changes to improve the computation processes.
After the rebasing, inflation dropped from 34.80 per cent in the pre-rebased period of December 2024 to 24.48 per cent in January 2025. It dropped further to 23.18 per cent in February.
In its latest report, NBS recorded 186 basis points changes between the monthly inflation rate, with the month-on-month rate rising from 2.04 per cent in February to 3.90 per cent in March.
The NBS attributed the spike to the rise in costs of food and alcoholic beverages, fuels and electricity, among other items.
Analysts at CardinalStone said the resurgence was due to renewed foreign exchange (forex) pressures amid heightened global risk-off sentiment.
They pointed at foreign portfolio investments (FPIs) outflows and increased dollar demand, which saw naira dropping by 2.4 per cent in March.
Experts also cited increase in price of Premium Motor Spirit (PMS) or petrol, following the temporary suspension of the naira-for-crude swap arrangement.
Food inflation rate stood at 21.79 per cent in March 2025. The composite food index decreased to 21.79 per cent from 23.51 per cent.
Core inflation, which excludes volatile agricultural produce prices and energy, rose to 24.43 per cent from 23.01 per cent.
Specifically, the month-on-month food inflation rose by 50 basis points from 1.67 per cent in February to 2.18 per cent in March.
The NBS attributed the increase in food inflation to increases in the average prices of basic food items including ginger, garri, broken rice, honey, crabs, potatoes, plantain flour, periwinkle and pepper amongst others.
On a state-by-state basis, food inflation was higher in Oyo with 34.41 per cent; Kaduna (31.14 per cent) and Kebbi (30.85 per cent).
On the other side, the 9.61 per cent recorded by Bayelsa; Adamawa (12.41 per cent) and Akwa Ibom (12.60 per cent), were the lowest inflation rates.
Analysts expressed concerns that the resurgent inflationary pressure might lead to renewed tightening stance by the Central Bank of Nigeria (CBN).
CBN Governor Dr. Olayemi Cardoso, had at the end of the first Monetary Policy Committee (MPC) meeting in 2025, reiterated the apex bank’s commitment to orthodox monetary policies, noting that the apex bank’s stance will be reflective of the inflationary trend.
With inflation rate dropping in February, the MPC had decided to maintain all key monetary policy parameters, including the Monetary Policy Rate (MPR) at 27.50 per cent, the asymmetric corridor around the MPR at +500/-100 basis points, the Cash Reserve Ratio (CRR) at 50.00 per cent for Deposit Money Banks and 16.00 per cent for Merchant Banks, and the Liquidity Ratio at 30.00 per cent.
Clarifying the impact of the rebased CPI, Cardoso had explained that the lower inflation figure should not be misinterpreted.
He underlined the need to analyse more data before drawing comparisons, noting that the CBN is currently assessing the figures and will provide further guidance in due course.
The CBN boss stressed the critical importance of collaboration between monetary and fiscal authorities in sustaining recent economic improvements.
Addressing concerns about the impact of elevated borrowing costs on economic growth, the CBN governor assured that the apex bank’s primary objective is to stabilize the foreign exchange and financial markets.
He expressed confidence that such stability would attract increased foreign investments, stimulating the much-needed economic growth.
Cardoso also highlighted the competitiveness of the Nigerian currency, which has spurred growing interest from international investors.
The exchange rate between the US dollar and the Nigerian naira continues to draw significant attention from individuals and businesses alike, especially those involved in international trade and remittances.
On Saturday, April 12, 2025, activity in the Lagos parallel market, commonly known as the black market shows that the buying rate for one US dollar stands at ₦1570, while the selling rate is ₦1575.
These figures are sourced from traders and Bureau De Change (BDC) operators who are active in key currency exchange hubs across Lagos.
Why the Black Market Rate Matters
Although the Central Bank of Nigeria (CBN) does not officially recognize or support the use of the black market for foreign exchange transactions, many Nigerians still rely on it due to difficulties in accessing forex through official banking channels. Issues such as limited availability, long processing times, and strict documentation requirements have made the black market a more accessible, albeit riskier, alternative.
CBN’s Official Position
The CBN continues to warn against participating in parallel market trading, stating that such activities undermine the stability of the national currency. The apex bank urges those in need of foreign currency to apply through authorized financial institutions, which are mandated to follow official exchange rates.
Nonetheless, the disparity between the official and unofficial markets persists, often influenced by market forces such as demand, inflation, and fluctuations in Nigeria’s foreign reserves.
Latest Exchange Rates Overview
Black Market (Parallel Market) Rate
Currency Pair Buying Rate Selling Rate
USD/NGN ₦1570 ₦1575
CBN Official Rate
Currency Pair Highest Rate Lowest Rate
USD/NGN ₦1630 ₦1570
Key Notes for Forex Users
The exchange rates in the black market often differ slightly from one location or dealer to another due to market volatility and negotiation margins.
Rates can also fluctuate within hours based on economic news, government policies, and global financial trends.
It is advisable to compare rates from multiple sources before conducting any large transactions, especially in volatile markets.
What This Means for Nigerians
The current forex rates reflect continued pressure on the naira, and many analysts believe that inflation, reduced oil revenue, and inconsistent monetary policies are key factors driving the demand for the dollar. For everyday Nigerians, this means the cost of imported goods remains high, and businesses dependent on international suppliers face growing challenges.
Until forex supply stabilizes through official channels, the black market will likely remain a major player in Nigeria’s currency landscape.
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