The Governor of the Central Bank of Nigeria, Mr. Olayemi Cardoso, has staunchly defended the apex bank’s recent decision to increase the Monetary Policy Rate to 27.25 percent.
According to The PUNCH, this move, Cardoso explained, is aimed at reining in inflation and reducing the excessive amount of money in circulation, which is crucial for the nation’s economic health. A press statement released by the CBN on Sunday detailed these comments.
In his address at the Harvard Club of Nigeria over the weekend, Cardoso acknowledged the challenges posed by higher interest rates, particularly for borrowers.
However, he stressed that such measures were necessary to safeguard the broader economy, even if they might cause short-term discomfort.
“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,” said Cardoso.
Reflecting on his leadership since assuming office, which now spans a year, Cardoso underlined the importance of the CBN’s focus on its core objectives—particularly its commitment to managing inflation, restoring the bank’s credibility, and building public trust in the financial system.
These elements, he argued, are fundamental for economic recovery.
He also highlighted the importance of trust in central banking, noting that without it, even the most well-crafted policies would struggle to be effective.
Cardoso stated, “Trust is the currency of central banking. If the public loses trust in the institution, the efficacy of its policies diminishes.”
One of the key steps in rebuilding this trust, according to the governor, is the introduction of the Electronic Foreign Exchange Matching System.
This system, which aims to improve the transparency of forex transactions, is designed to boost market confidence and ensure a fairer playing field.
“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,” Cardoso remarked.
He also revisited the bank’s earlier decision to float the naira, a move that initially drew significant public criticism.
However, Cardoso justified the controversial policy by pointing out that it was necessary to align the official exchange rate more closely with market realities.
This, he said, has begun to stabilize the currency markets and curb speculative trading.
Though the CBN has yet to meet its ultimate inflation targets, Cardoso expressed optimism about the progress being made.
He cited recent data from the National Bureau of Statistics which indicated that inflation had started to decline in July and August of 2024. While challenges persist, he maintained that the CBN’s strategies are gradually steering Nigeria’s economy in the right direction.
Cardoso’s address not only reflected on his time at the helm of Nigeria’s central bank but also charted a course forward, focusing on the need for continued transparency, market stability, and public trust in the institution’s policies.
