The Central Bank of Nigeria (CBN) Governor, Olayemi Cardoso, has affirmed that interest rates will remain high until inflation is effectively tamed.
Speaking to the Financial Times, Cardoso emphasized the implementation of orthodox monetary policies as pivotal in curbing inflationary pressures gripping the nation.
“The CBN will persist in employing orthodox measures until we see a significant downturn in inflation,” Cardoso stated firmly, indicating a readiness of the Monetary Policy Committee (MPC) to take actions to rein in the escalating inflation rates.
Acknowledging the historical departure from orthodox monetary policies, Cardoso emphasized the need to revert to proven methods to achieve price and monetary stability. He stated the stabilizing effect observed in the official foreign exchange (FX) market, attributing it to a renewed investor confidence fostered by the CBN’s strategic interventions.
Moreover, Cardoso defended the necessity of high interest rates, asserting that while they may temporarily deter investment and production, they are instrumental in moderating foreign exchange market volatility. He noted a tangible impact on currency fluctuations following interest rate hikes, illustrating a shift towards a more balanced market environment.
Despite the concerted efforts, Cardoso lamented that inflation remained stubbornly high, primarily fueled by distortions, particularly in food prices, which are beyond the direct control of the CBN. He referenced the alarming rise in Nigeria’s inflation rate, soaring to 33.20 percent in March, a worrisome escalation from the previous month’s figure of 31.70 percent.
In response to the inflationary pressures, the MPC took action in March, raising the interest rate by 200 basis points to 24.75 percent. While these measures initially stabilized the official FX rate, recent fluctuations have accentuated the ongoing challenges in restoring stability to the Nigerian economy.
