By Joke Kujenya
THE GOVERNOR of the Central Bank of Nigeria (CBN), Olayemi Cardoso, has indicated the institution’s commitment to maintaining high interest rates until inflation recedes, relying on orthodox policies to achieve this goal.
In an interview with the Financial Times, Cardoso, who chairs the Monetary Policy Committee (MPC), emphasized the committee’s determination to take decisive actions to curb the alarming inflation rates plaguing Nigeria.
With inflation currently standing at 33.2 percent, a three-decade high, and food inflation even higher at 40 percent, the urgency to address this economic challenge is paramount.
“There is every indication that the MPC would do whatever is necessary. They will continue to do what has to be done to ensure that inflation comes down,” stated Cardoso.
Acknowledging the departure from previous monetary policy approaches, Cardoso highlighted the CBN’s renewed focus on orthodox methods aimed at achieving price and monetary stability.
The recent increments in the monetary policy rate, raised by 400 and 200 basis points in February and March respectively, reflect the CBN’s efforts to tighten monetary conditions, with the key lending rate now at 24.75 percent.
Regarding the volatility of the naira against the US dollar, Cardoso noted a stabilization trend. He remarked on a perceptible shift among investors, who are increasingly adapting to market dynamics rather than reacting impulsively to currency fluctuations.
Razia Khan, Chief Economist at Standard Chartered Bank, commended Nigeria’s return to orthodox policies, noting investor endorsement of such measures. While Nigeria is not pursuing an IMF programme, its policy direction aligns with IMF-endorsed strategies.
However, Dumebi Oluwole, Senior Economist at data firm Stears, cautioned that Nigeria’s inflation is deeply rooted in structural issues, including insecurity hampering food production, thus exacerbating food inflation.
David Adonri, Vice Chairman of Highcap Securities, echoed concerns about the repercussions of high-interest rates on the economy. He emphasized the need for coordinated monetary and fiscal policies to address supply-side constraints and mitigate inflationary pressures effectively.
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