This week, we review the outcome of the 303rd Monetary Policy Committee (MPC) meeting of the Central Bank of Nigeria (CBN) and the Q2:2025 domestic and external debt statistics released by the National Bureau of Statistics (NBS). At the MPC meeting, the Committee retained the Monetary Policy Rate (MPR) at 27.0%, contrary to our expectation of a mild 25–50bps cut.
However, the asymmetric corridor was adjusted to +50/-450bps from +250/-250bps, despite the sustained disinflation trend which saw headline inflation fall for the seventh consecutive month to 16.1% in October – its lowest level since September 2021.
The corridor adjustment implies that banks accessing liquidity from the CBN will now pay 27.5% per annum (down from 29.0%), while banks placing excess liquidity with the apex bank will earn 22.5% per annum (down from 24.0%). Although the MPR was left unchanged, this move reinforces the dovish shift signaled at the September 2025 MPC meeting, when the CBN cut the policy rate for the first time in five years.
In our assessment, the CBN’s cautious posture – despite clear disinflation – is deliberate and appropriate. A key driver of the seven-month disinflation streak has been the relative stability in the FX market. The naira has appreciated 6.6% YTD in the official window to ₦1,442.92/$1.00, with the gap between the official and parallel markets narrowing significantly between ₦5.00–₦20.00, compared to over ₦100.00 a year earlier.
This stability has been supported by regulatory reforms (including the liberalisation of access to the FX window and removal of restrictions on 43 previously barred items) as well as enhanced transparency measures such as the EFMES platform. Additionally, the CBN has maintained attractive yield levels on OMO instruments to retain foreign portfolio investors (FPIs). Consequently, Nigeria recorded $5.2bn in capital importation in Q1:2025 – the highest since Q1:2020 – with 74.6% flowing into money market instruments where long-dated OMO and T-bills cleared at 22.7% and 18.5% at their February peaks.
Despite inflation easing to 16.1%, yields at the recent November PMA remained elevated – OMO bills cleared at 21.8%, while NT-Bills cleared at 16.0%. External reserves have risen to a seven-year high of $44.6bn as of November 27, 2025. The persistently high yield environment, especially on OMO instruments heavily favoured by FPIs, supports our view that the MPC opted to keep the MPR unchanged to preserve foreign inflows and sustain FX and price stability.
Notably, the YTD reserve accretion of $3.7bn trails the $4.2bn FPI inflows recorded in Q1 alone – implying that in the absence of strong FPI participation and the recent $2.35bn Eurobond issuance, reserve levels would have been materially weaker relative to 2024. Given the interest payment burden associated with reliance on short-term foreign inflows, we reiterate that the federal government must accelerate efforts to promote organic FX sources – oil and non-oil exports, FDI, and diaspora remittances – to reduce pressure on monetary policy and enable more sustainable interest rate adjustments.
Turning to fiscal developments, the NBS reported that Nigeria’s total public debt stock rose 2.0% q/q and 13.5% y/y to ₦152.4tn in Q2:2025. In USD terms, the debt stock increased 2.5% q/q and 9.1% y/y to $99.7bn, with the federal government accounting for 79.9% (₦6.2tn) of the ₦7.7tn increase in H1:2025. Revenue shortfalls – particularly in oil earnings – remain a concern. NUPRC data shows average crude oil and condensate production of 1.66mbpd (below the budgeted 2.06mbpd), while crude prices averaged $70.34/bbl YTD (vs $75.00/bbl budget benchmark).
This has resulted in an estimated 24.4% revenue underperformance by YTD. The fiscal authorities have consequently intensified domestic and external borrowing despite improved non-oil revenue performance in 9M:2025 (₦23.7tn vs ₦19.9tn target), owing to the weak oil revenue leg.
As previously highlighted in our macro commentaries, the FG has already exceeded its ₦7.4tn domestic borrowing target for 2025 by at least 14.7%, with ₦6.2tn raised in H1 and an additional ₦3.3tn between July and October.
External debt also rose by $1.2bn in H1:2025, with our estimates suggesting a current figure near $4.0bn, following the November Eurobond issuance ($2.35bn). We maintain that borrowing must be closely tied to value creation, and urgent reforms are required to strengthen sustainable revenue channels to avert long-term debt vulnerabilities.
Afrinvest
