CBN Maintain High Interest Rates to Control Inflation- Cardoso

The Governor of the Central Bank of Nigeria (CBN), Olayemi Cardoso, has indicated that the apex bank will maintain high interest rates until inflation decreases by implementing traditional policies.

Inflation in Nigeria remains persistently high at 33.2 percent, the highest in thirty years, while food inflation is even higher at 40 percent.Cardoso, in an interview with the Financial Times, st

ated that the Monetary Policy Committee (MPC), which he leads, will take all necessary measures to control the surging inflation.

"There are clear signs that the MPC will take all necessary measures. They will continue to take the required actions to ensure that inflation decreases," Cardoso said, prior to the committee's meeting on May 20 and 21.

Cardoso’s position sharply differs from his predecessor Godwin Emefiele, who managed a period of high inflation in Nigeria as the central bank consistently printed money to finance government deficits exceeding the 5 percent limit allowed by law.

He expressed, "Let's be honest: for a long time, the CBN did not adopt conventional monetary policies. We aim to return to using orthodox methods, which will lead us to our desired destination. The central bank has been reoriented to prioritize price and monetary stability."

It is worth noting that the monetary policy rate was raised by 400 and 200 basis points in February and March, respectively, resulting in the key lending rate reaching 24.75 percent.

Regarding the fluctuating value of the naira against the US dollar, Cardoso mentioned that the situation has now stabilized.

"Investors used to react to currency fluctuations by seeking alternative options. However, there has been a significant change. They are becoming more comfortable with the market," he explained.

Overall, the markets have responded positively to the CBN's approach under Cardoso.

However, not all domestic stakeholders support these policies, as businesses have raised concerns about the high cost of credit, despite a gradual return of foreign portfolio investors to the country.