CBN Governor Vows Continued Tightening Until Inflation Falls: “No Let-Up” on Rate Hikes
By Patience Ikpeme
In a move that surprised many analysts, the Central Bank of Nigeria (CBN) Governor, Olayemi Cardoso, announced on Tuesday that the bank would hold firm on its policy of raising interest rates to combat inflation.
This decision comes despite hopes from some quarters for a potential easing of the Monetary Policy Rate (MPR).
Cardoso, speaking at the 297th meeting of the Monetary Policy Committee (MPC), confirmed a 50 basis point hike in the MPR, bringing it to 27.25 percent. This increase signifies the CBN’s unwavering commitment to taming inflation, which remains a major concern for the Nigerian economy. The committee also adjusted other monetary policy tools, including the Cash Reserve Ratio (CRR) and Liquidity Ratio, to further tighten liquidity.
Governor Cardoso defended the MPC’s decision, emphasizing the need to prioritize curbing inflation. He acknowledged some progress in recent months but stressed that the battle is far from over. “We will use all the tools in our disposal” to bring inflation down to a “tolerable level,” he declared. According to Cardoso, uncontrolled inflation is detrimental to economic growth and poverty reduction efforts.
Cardoso further addressed concerns surrounding the CBN’s foreign exchange policies. He acknowledged the challenges inherited from previous administrations, including a period of loose monetary policy, multiple exchange rates, and a backlog of forex requests. He highlighted the bank’s efforts to rectify these issues, including establishing a more flexible exchange rate system and clearing the forex backlog. These actions, Cardoso claimed, have restored investor confidence in the Nigerian economy.
The CBN Governor emphasized his focus on rebuilding trust in the institution. He views restoring credibility as a prerequisite for achieving other economic goals. Cardoso also stated the bank’s commitment to returning to orthodox monetary policy practices, moving away from past unconventional methods.
Cardoso expressed optimism about the potential impact of the Dangote Refinery project on the Nigerian economy. He believes that reducing reliance on imported oil products will alleviate pressure on foreign exchange reserves and strengthen the naira. This, in turn, will support the CBN’s efforts in managing the exchange rate.
While acknowledging progress, Governor Cardoso cautioned against complacency. The fight against inflation remains the central bank’s top priority. The CBN’s continued tightening measures are intended to bring price stability and lay the foundation for a more robust economy in the future. The Dangote Refinery project offers a beacon of hope, potentially providing a long-term solution to Nigeria’s dependence on imported fuel and its associated forex challenges.
