CBN’s Commitment to Combating Inflation with High Interest Rates
In a determined effort to combat the surging inflation in Nigeria, the Governor of the Central Bank of Nigeria (CBN), Olayemi Cardoso, has outlined the bank’s strategy to maintain high interest rates. This move is expected to continue until there’s a significant reduction in the inflation rates, leveraging what Cardoso describes as orthodox monetary policies to achieve financial stability.
During a revealing session with the Financial Times, Governor Cardiso shed light on the aggressive approach the Monetary Policy Committee (MPC), under his leadership, is willing to adopt to curb the inflation menace that has beleaguered Africa’s largest economy. Nigeria is currently grappling with an inflation rate that peaked at 33.2 per cent, marking a three-decade high, while the rates for food inflation soar at an alarming 40 per cent. This economic climate spells hardship for the average Nigerian, making the CBN’s interventions crucial.
“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 strongly stated. He further emphasized the bank’s renewed commitment to orthodox monetary principles, a pathway he believes would drive the nation towards the much-needed economic stability. “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,” he added.
The aggressive monetary policy adjustments have seen the monetary policy rate increasements by 400 and 200 basis points in the consecutive months of February and March, with the key lending rate now standing at 24.75 percent. These adjustments are part of a series of measures the CBN is taking to manage inflationary pressures effectively and restore confidence among investors and the general populace in the Nigerian economy.
Cardoso also touched on the stabilization of the Nigerian naira against the US dollar, noting a significant improvement in the currency market. Investors, previously wary due to fluctuations, now exhibit increased confidence. “They’re getting more comfortable with the market,” Cardoso remarked, highlighting the positive outlook towards the Nigerian economy’s future amidst these strategic interventions.
The resolve by the CBN to keep interest rates high until a noticeable decline in inflation is seen is a testament to the central bank’s proactive steps in ensuring economic stability. Through these orthodox policies and strategic adjustments, there’s a beacon of hope that Nigeria will navigate through these challenging economic times towards a period of sustainable growth and stability.
