The Governor of the Central Bank of Nigeria (CBN), Olayemi Cardoso, has hinted that the current high interest rate would be reduced very soon as the inflationary pressure eases as expected.
This was made known by Cardoso while delivering a keynote address at the Chartered Institute of Bankers of Nigeria (CIBN) annual dinner held on November 29, 2024, at Eko Hotel in Lagos.
Cardoso said the cumulative raising of the Monetary Policy Rate (MPR) by 875 basis points to 27.5% this year were an “essential move” to contain inflation and restore stability.
The CBN boss, who recognized the challenges that higher interest rates impose on businesses and families, however, noted that these measures are not intended to be permanent.
What the CBN Governor is saying
Cardoso in his speech said, ‘
- ’To tackle the pressing challenge of inflation, the CBN acted decisively by raising the Monetary Policy Rate by 875 basis points to 27.5% in 2024—an essential move to contain inflation and restore stability.
- ‘’To borrow from Winston Churchill’s famous perspective: in our world, interest rates are undoubtedly the least desirable tool for combating inflation—except for all the others! I fully recognize the challenges that higher interest rates impose on businesses and families. However, these measures are not intended to be permanent. We are closely monitoring the data, and as inflation shows sustained signs of improvement—something we expect in the near future—we will adjust rates accordingly.
- ‘’Our tight monetary policy stance has altered the previous dire trajectory, and we expect a downward trend in 2025. Inflation remains unacceptably high, but the signs are encouraging, particularly given that the full effects of monetary policy typically take 6-9 months to impact the consumer sector. Our commitment is unwavering: we will prioritize price stability until its benefits are felt by every Nigerian.’’
What you should know
- Cardoso, who was appointed the CBN Governor by President Bola Tinubu in September 2023, has pursued aggressive interest-rate increases since assumption of office to curb rising inflation.
- The National Bureau of Statistics (NBS) had in its Consumer Price Index (CPI) report announced that Nigeria’s headline inflation rate rose to 33.88% in October 2024, up from 32.7% in September 2024.
- According to the NBS, the rise in inflation was attributed to increased transportation costs and higher food prices.
- On a year-on-year basis, the rate was 6.55 percentage points higher than the 27.33% recorded in October 2023, highlighting a substantial increase in inflation over the past year.
- Meanwhile, the CBN had earlier in the week raised its interest rate, increasing it by 25 basis points from 27.25% to 27.50%, in a bid to address the rising inflation in the country.
- This decision was announced by Cardoso, who also serves as the Chairman of the Monetary Policy Committee (MPC), at the conclusion of the committee’s meeting held in Abuja. The MPC unanimously agreed to the hike, raising the interest rate by 25 basis points to 27.50%, up from its previous level in September.
- The rate was increased from 18.75% to 22.75%, followed by subsequent hikes to 24.75% and 26.25%. In July 2024, a 50 basis point increase brought the rate to 26.75%.
- In September, the MPC implemented another 50 basis point hike, raising the rate to 27.25%.
