Olayemi Cardoso, the governor of the Central Bank of Nigeria (CBN), has proposed that interest rates stay high until the rate of inflation declines.
He asserts that every effort is being made by the CBN Monetary Policy Committee (MPC) to fight inflation.
Cardoso said that traditional measures will be implemented to manage inflation.
According to THE MATRIX, Nigeria’s inflation rate increased from 31.70 percent in February to 33.20 percent in March. Consequently, the interest rate was raised by 200 basis points to 24.75 percent in March by the Monetary Policy Committee (MPC) of the CBN.
Read Also: Fitch Projects CBN to further increase interest rates in second half of 2024
Speaking, however, on the events, Cardoso said: “They will continue to do what has to be done to ensure that inflation comes down.
“Let’s face it: for a long period of time, 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 CBN governor said the apex bank had been “reoriented” to focus on “price and monetary stability”.
Read Also: CBN Reduces Interest Rates on 1-year treasury bills by 42.4 bps to 20.7%
The governor stated that the official window of the foreign exchange (FX) market has been brought to a stable state.
As per his remarks, investors used to have an inclination to approach the window when faced with currency fluctuations, but there has been a significant change in this pattern.
Cardoso mentioned that investors are now becoming more at ease with the market.
Read Also: Equity: CBN Sells N1.64 Trillion In Treasury Bills As Higher Interest Rates Attract Investors
THE MATRIX understands that the naira dropped to a record low of ₦1,627.40/$ in the official FX window on March 8 before bouncing back to ₦1,154.08/$ on April 18. However, following this recovery, the local currency started to decline once again.
By May 10, the official FX rate was recorded at ₦1,466.31/$.
Cardoso emphasized the importance of increasing interest rates, stating that it has been essential. He expressed concerns that prolonged high interest rates could discourage investment and hinder production.
“Hiking interest rates obviously has had a dampening effect on the foreign exchange market, so that has begun to moderate. It’s not a zero-sum game. You lose on one side, you get on the other,” he said.
