The Governor of the Central Bank of Nigeria (CBN), Olayemi Cardoso, has indicated that interest rates will remain high for the foreseeable future to curb inflation.
The statement comes amid the CBN’s efforts to adopt a more orthodox monetary policy stance after facing scandals under its previous leadership, as reported by Financial Times.
Cardoso emphasized the commitment of the monetary policy committee to take necessary measures to control soaring inflation, stating, “They will continue to do what has to be done to ensure that inflation comes down.”
Analysts anticipate further significant rate hikes at the upcoming CBN meeting on May 20-21.
Cardoso’s stance contrasts sharply with his predecessor, Godwin Emefiele, who oversaw a period of high inflation due to excessive money printing to fund government deficits beyond legal limits.
Nigeria currently faces stubbornly high inflation at 33.2 per cent, the highest in three decades, with food inflation even higher at 40 per cent.
Cardoso acknowledged the need for a return to orthodox monetary policies, emphasizing the importance of price and monetary stability.
Under Cardoso’s leadership, the CBN raised interest rates by 400 and 200 basis points in February and March, respectively, bringing the key lending rate to 24.75 per cent.
These moves aimed to stabilize the value of the naira against the US dollar, which had previously experienced significant depreciation.
While Cardoso acknowledged that high interest rates could deter investment and production, he deemed them essential in the current economic context.
He reiterated the government’s broader efforts to revamp the economy, including the removal of fuel subsidies and the discontinuation of the currency peg against the dollar.
Despite the challenges posed by high inflation and policy adjustments, Cardoso expressed optimism about Nigeria’s economic prospects in the medium term.
However, he conceded that inflation remains a significant concern, largely driven by distortions, particularly in food prices.
Cardoso had earlier addressed concerns about the foreign exchange (FX) rate volatility, stating that fluctuations are to be expected and cannot be resolved overnight.
Speaking at a joint briefing during the World Bank/IMF Spring Meetings in Washington DC, Cardoso assured Nigerians that the CBN is actively working to achieve a stable exchange rate.
He also acknowledged that fluctuations in the exchange rate are inevitable but noted recent signs of the naira strengthening.
