The Governor of the Central Bank of Nigeria, Mr. Olayemi Cardoso, has strongly defended the bank’s decision to raise the Monetary Policy Rate to 27.25%, a move aimed at curbing inflation and controlling the excess liquidity in the economy.
This rationale was outlined in a press release issued by the CBN on Sunday, as reported by The PUNCH.
Speaking at an event hosted by the Harvard Club of Nigeria over the weekend, Cardoso acknowledged the challenges the higher interest rates pose, particularly for borrowers, but emphasized that the policy is crucial for the nation’s long-term economic stability.
“Our decision to raise the MPR to 27.25% was a bold but necessary step,” Cardoso stated. “Higher interest rates, while difficult for borrowers, are essential to reduce the excess money supply and bring inflation under control. Leadership requires making tough decisions to ensure long-term stability, even at the cost of short-term discomfort.”
Since taking office a year ago, Cardoso has focused on key objectives for the CBN, including managing inflation, restoring the bank’s credibility, and rebuilding public trust in the financial system. He stressed that these are fundamental for Nigeria’s economic recovery, adding that trust in the CBN is critical for the success of its policies.
“Trust is the currency of central banking,” Cardoso said. “Without it, even the most well-thought-out policies will fall short.”
A key initiative to rebuild this trust, according to the governor, is the introduction of the Electronic Foreign Exchange Matching System, designed to enhance transparency in forex transactions and promote market confidence. “By implementing this system, we are ensuring a more transparent and fair foreign exchange market,” Cardoso noted.
Cardoso also defended the CBN’s earlier decision to float the naira, a policy that initially sparked public criticism. He explained that the move was necessary to bring the official exchange rate in line with market realities, which has since helped stabilize the currency and reduce speculative trading.
While acknowledging that the CBN has not yet met its inflation targets, Cardoso expressed optimism, citing recent data from the National Bureau of Statistics that showed inflation beginning to decline in July and August 2024. He assured that the CBN’s strategies are steering the economy in the right direction, even as challenges remain.
In his address, Cardoso charted a path forward for the central bank, emphasizing continued transparency, market stability, and the importance of maintaining public trust in the institution’s policies.
