Mr Olayemi Cardoso, Governor of the Central Bank of Nigeria (CBN), has stated that the apex bank is unable to reduce interest rates as seen in many other countries due to the country’s high inflation rate.
Addressing a press conference at the conclusion of the 2024 IMF/World Bank Annual Meetings in Washington yesterday, he stated that the CBN must be vigilant to avoid making decisions that could cause the inflation rate to spiral out of control.
His words, “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.”
The governor said that his reforms were working as the volatility in the FX market had reduced significantly and remittances had increased greatly.
According to him, “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.
“We recognize the continued support of our key stakeholders, including investors, banks, Nigeria Diaspora and businesses. With our counterparts on the fiscal side, we have strengthened collaboration over the past year by establishing several joint committees.
“These committees are designed to drive actionable outcomes, creating impactful platforms for stakeholder engagements and delivering concrete solutions to allow monetary policy with fiscal operations more effectively.
“I am confident that with our collective efforts and sustained commitment, we can pave the way for a more prosperous Nigeria that fosters robust and inclusive growth.”
