The Governor of the Central Bank of Nigeria, Dr. Olayemi Cardoso has declared that it will soon be able to cut down increases in benchmark interest rates.
This was disclosed by Cardoso on Saturday in Lagos at the launch of a book titled ‘The Power of One Man: How the Soludo-Engineered Consolidation Transformed Nigerian Banks to Global Players’, authored by Ray Echebiri, according to the PUNCH.
The CBN governor, represented by the CBN’s Deputy Governor of Financial Stability, Phillip Ikeazor, stated that keeping interest rates high is critical to reducing the risk of hyperinflation and its effects.
He said, “Once you do not tame and control inflation and you get into hyperinflation, it takes you several years to get out of it. There is still a South American country that still has significant oil reserves but they are in hyperinflation and I think everyone is aware of what is happening in that economy. We have another country in East Africa which is also in hyperinflation. We know how hard they are struggling to get out of that.
“For us as a central bank, we are focusing on our core mandate of price stability, maintaining a stable exchange rate, and, of course, economic growth. But it is a question of sequencing. It is very important that we do not enter hyperinflation. Once you enter hyperinflation, the transmission of monetary economic tools will become completely ineffective. It is important that we avoid that.”
On how long the rate hikes will be maintained, the regulator said, “That will be as long as we can control and can reverse galloping inflation. Once we can do that, then we maintain. We are all aware that in the Western world, we did have rate hikes to be able to control theirs and they maintained it for a very long time. It is only now that they have stopped rate hikes but they have not even started dropping the rates as we speak.
“It is important that we tighten and hold on for a little while and in no distant future, we will be able to slow down on the rate hikes.”
Cardoso declared in May that the central bank would continue to raise interest rates until inflation was under control.
In a Financial Times report, Cardoso noted that there was “every indication” that MPC would “do whatever is necessary” to rein in inflation.
“They will continue to do what has to be done to ensure that inflation comes down. Let’s face it: for a long period of time, the CBN did not embrace orthodox monetary policies. We want to go back to using an orthodox method, and it will take us to where we want to go,” he stated.
According to the National Bureau of Statistics, the headline inflation rate in May 2024 rose to 33.95 per cent from 33.69 per cent in April.
In May, the CBN’s Monetary Policy Committee raised the benchmark lending rate by 150 basis points to 26.25 per cent from 24.75 per cent.
Meanwhile, former President Olusegun Obasanjo has pushed for effective fiscal and monetary policy coordination to assist revolutionize the banking industry and attain economic stability.
“To sustain this growth, there must be appropriate consultations between fiscal and monetary authorities,” he said.
Obasanjo, who was represented by former Cross River governor, Donald Duke, also praised the boldness of Anambra State Governor and previous CBN Governor, Professor Chukwuma Soludo, in carrying out the 2005 banking sector consolidation, saying, “The consolidation initiated by Soludo was a courageous and necessary move. It has significantly contributed to the stability and growth of our banking sector.”
Commenting, Soludo highlighted the hurdles encountered during the 2005 consolidation, but expressed delight in the accomplishment and challenged the present CBN leadership to remain steadfast in their efforts to recapitalize the banks in order to keep up with the booming economy.
