Central Bank of Nigeria Governor Defends Interest Rate Hike to 27.25% as Key to Controlling Inflation
Olayemi Cardoso, the Governor of the Central Bank of Nigeria, has defended the recent decision to raise the Monetary Policy Rate to 27.25 percent as he described this increase as a necessary step to control inflation and manage the excess money circulating in the economy.
During a recent address at the Harvard Club of Nigeria, Cardoso acknowledged that while higher interest rates may be challenging for borrowers, they are essential for maintaining the country’s economic stability.
Furthermore, he emphasized that the Central Bank of Nigeria (CBN) is focused on critical objectives such as curbing inflation, restoring credibility, and building public trust in the financial system as He noted that trust is fundamental to effective central banking, and without it, the impact of the bank’s policies could be significantly diminished.
As he reflected on his first year in office, he underscored the importance of making tough choices to ensure long-term economic health over immediate comfort.
One key initiative mentioned by Cardoso is the introduction of the Electronic Foreign Exchange Matching System, designed to enhance transparency and restore market confidence. This system aims to provide more accurate oversight of foreign exchange transactions, signaling the CBN’s commitment to promoting fair and efficient markets. The Governor reiterated that maintaining public trust is vital for the success of the bank’s policies.
Additionally, Cardoso revisited the controversial decision to float the naira, a move that faced public criticism but was deemed necessary to align the official exchange rate with market realities and curb speculative trading. He stated that this action has begun to stabilize currency markets. While acknowledging that the CBN has not yet fully met its inflation targets, he expressed optimism, citing recent reports that indicate a decline in inflation rates for July and August 2024, suggesting that the bank’s policies are gradually steering the economy in a positive direction despite ongoing challenges.
