May 28, 2024


Central Bank of Nigeria (CBN) Governor, Olayemi Cardoso, has indicated that the apex bank will persist with high interest rates until inflation is brought under control through orthodox policies.

In an interview with the Financial Times, Cardoso emphasized the Monetary Policy Committee’s commitment to curbing the soaring inflation, which currently stands at 33.2%, the highest in three decades, with food inflation even higher at 40%.

Cardoso’s stance marks a departure from the previous approach under his predecessor, Godwin Emefiele, who faced criticism for resorting to unconventional monetary policies, including printing money to fund government deficits beyond legal limits.

The recent hikes in the monetary policy rate, lifting the key lending rate to 24.75%, reflect the CBN’s shift towards orthodox monetary policies aimed at achieving price and monetary stability.

Despite concerns about the adverse effects of high interest rates on the economy, including increased production costs and reduced consumer credit, Cardoso stressed the necessity of these measures to moderate the foreign exchange market and address inflationary pressures.

While acknowledging that inflation remains a significant challenge, Cardoso attributed the persistently high rates to “distortions,” particularly in food prices, which are beyond the CBN’s direct control.

Market analysts have offered mixed reactions to the CBN’s approach, with some endorsing the return to orthodoxy as endorsed by investors, while others highlight structural issues such as insecurity affecting food production and contributing to inflation.

Looking ahead, Cardoso expressed hope that high rates would not persist indefinitely and acknowledged the need for a balanced approach between monetary and fiscal policies to address supply gaps and rein in inflation while promoting investment and production.

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