Higher interest rates will curb inflation – Cardoso

Central Bank of Nigeria, Olayemi Cardoso

The Governor of the Central Bank of Nigeria, Mr Olayemi Cardoso, has

defended the bank’s decision to raise the Monetary Policy Rate to 27.25
per cent, describing it as a necessary move to control inflation and
curb excess money in circulation.
This is according to a press statement from the apex bank on Sunday.
Speaking during an address at the
Harvard Club of Nigeria over the weekend, Cardoso emphasized that the
rate hike, while tough on borrowers, is crucial for the country’s
economic stability.
“Our decision to raise the Monetary
Policy Rate to 27.25 per cent was a bold move. Higher interest rates,
while painful for borrowers, are necessary to curb excess money in
circulation and control inflation. Leadership is about making hard
choices to secure long-term stability over short-term comfort in moments
like these,” Cardoso said.

He noted that the CBN’s focus on core
objectives, such as containing inflation, restoring credibility, and
building public trust in the financial system, is critical to any
meaningful recovery.
Cardoso’s remarks came as he
reflected on his tenure as the head of the CBN, marking one year in
office. He pointed out that trust is at the core of central banking, and
without it, the effectiveness of the bank’s policies would diminish.
The CBN Governor also said the
introduction of the Electronic Foreign Exchange Matching System is a key
initiative to enhance transparency and restore market confidence. “Trust is the currency of central banking. If the public loses trust in the institution, the efficacy of
its policies diminishes. Our decision to implement the Electronic
Foreign Exchange Matching System is rooted in this understanding.
“By enhancing transparency and
providing more accurate oversight of forex transactions, we send a
strong signal that the CBN is serious about fair and efficient markets,”
he said.

Cardoso also revisited the bank’s controversial decision to float the naira, a move that was met with public criticism.
He explained that the decision was
necessary to bring the official exchange rate closer to market reality
and reduce speculative trading.
He asserted that the move had started stabilising the currency markets and reducing speculative trading.
While the CBN has yet to fully
achieve its inflation targets, Cardoso expressed optimism, citing recent
reports from the National Bureau of Statistics (NBS), which showed
inflation had begun to decline in July and August 2024.
He acknowledged that the bank’s policies are gradually steering the economy in the right direction, though challenges remain.