- CBN governor, Olayemi Cardoso, says the bank is cautious about lowering interest rate
- The bank has been hiking the interest rate to curb inflation and excess liquidity
- Cardoso says the bank is committed to addressing forex volatility
The governor of the Central Bank of Nigeria (CBN), Olayemi Cardoso, says the bank is cautious about lowering the interest rate due to the persistently high inflation rate in Nigeria.
Cardoso said though central banks around the world are lowering interest rates, the CBN’s approach is “a lot more measured” and considering the Nigerian context to avoid the inflation rate getting out of control.
He stated this while addressing a press conference at the end of the 2024 IMF/World Bank Annual Meetings, in Washington.
“The whole world has generally started to ease rate because the pressure is coming off. The challenges that Nigeria has faced need to be put in proper context – loss of Money Supply and a host of other issues that have put pressure on inflation.
“It is for that reason that our approach towards managing rates has been a lot more measured than what exists in the advanced economies. I also want to make a point that even in the case of easing in many of these countries, they take their time in doing so.
“The easing that we talk about is not something that is done overnight, at short notice. If you look at what happened in the UK and in the US, it took a long time before you can say you were comfortable enough to begin to moderate interest rates. We have to remain vigilant in Nigeria. We have to remain vigilant. We cannot afford a situation where inflation gets out of hand. We cannot afford it.
“We understand the very dysfunctional nature of a high interest rate and we hope that those would be things that over time will begin to moderate as we see the situation get better. Let me also say something here. The decisions that are taken concerning interest rates in Nigeria are primarily evidence-based. Members of the Monetary Policy Committee look at the data and come to a conclusion based on that.
“One of the things I have been canvassing for in the last few days here is how to strengthen the evidence-based process in the CBN. Because I think that is very key as we move along this whole road of travel,” Cardoso said.
CBN committed to addressing forex volatility
Cardoso also reiterated the apex bank’s commitment to eliminating challenges in the foreign exchange (forex) market, which have led to volatility in the market.
Forex volatility has put pressure on the naira, resulting in the depreciation of the currency, as it lost 40 per cent of its value in the first half of 2024 and recently depreciated by 43 per cent and is one of the worst-performing currencies on the African continent,
Cardoso noted, “We have eliminated the front-loading of the FX demand. We reaffirm the CBN’s commitment to addressing the challenges ahead.
“In recognising that much still needs to be done to fully achieve our goals, our path forward includes consolidating and sustaining the current progress through an efficient, transparent market system and deepening financial and economic inclusion, particularly for small businesses, households, women and young people across Nigeria by leveraging smarter technologies and remote banking solutions we aim to reduce transaction costs and expand financial access, ensuring that every Nigerian regardless of location or demography can meaningfully participate in our evolving financial system.
“Regardless of our commitment to orthodox monetary policy, let me reiterate our determination to follow this path through a sequenced approach in tackling challenges ahead.”
CBN has been hiking the interest rate to control inflation, reduce excess liquidity
The apex bank, in its efforts to tame inflation, has continued to increase the interest rate, which went up by 50 basis points (bps) to 27.25 per cent from 26.75 per cent in July at its 297th meeting held September 23 and 24.
The bank also hopes to reduce excess cash in circulation by hiking the interest rate, which will discourage borrowing. This also informs the apex bank’s mop-up exercises.
Despite the CBN monetary tightening stance, the inflation rate soared to a new 28-year all-time high of 34.19 per cent in June. It, however, tapered in July after 19 months, declining to 33.40 per cent. The rate declined further for the second consecutive month in August to 32.15 per cent before increasing to 32.70 per cent in September 2024.
5 policies that defined Olayemi Cardoso’s one year in office
Meanwhile, TheRadar reported that Olayemi Cardoso recently marked one year of being the governor of the Central Bank of Nigeria (CBN).
The one-year period is characterised by five major policies, which include the bank recapitalisation exercise, clearing of forex backlog and lifting of forex restriction on 43 items.
