The Governor of the Central Bank of Nigeria (CBN), Olayemi Cardoso, has hinted that the apex bank will keep interest rates high until inflation subsides by implementing orthodox policies.
Inflation in Nigeria remains stubbornly high at 33.2 per cent, the highest in three decades, while food inflation is higher still at 40 per cent.
Cardoso, in an interview with the Financial Times, said that the Monetary Policy Committee (MPC), which he chairs, would do whatever is necessary to keep the soaring inflation in check.
“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,” Cardoso said, ahead of the committee’s meeting on May 20 and 21.
Cardoso’s stance is in sharp contrast with his predecessor Godwin Emefiele, who oversaw an inflation crisis in Nigeria as the central bank regularly printed money to fund government deficits beyond the 5 per cent limit permitted by law.
He stated: “Let’s face it: for a long period, the CBN did not embrace orthodox monetary policies. We want to go back to using an orthodox method, and it will take us to where we want to go. The apex bank has been reoriented to focus on price and monetary stability.”
Recall that the monetary policy rate was hiked by 400 and 200 basis points in February and March respectively, which lifted the key lending rate to 24.75 per cent.
Speaking on the fluctuating value of the naira against the US dollar, Cardoso said the situation had now stabilised.
“Investors had previously tended to head for the window in response to currency fluctuations. But now, there had been a fundamental shift. They’re getting more comfortable with the market,” he stated.
Markets have generally welcomed the CBN’s stance under Cardoso, but the policies do not receive universal domestic support, with businesses complaining about the high cost of credit even as foreign portfolio investors have gradually returned to the country.
