The Governor of the Central Bank of Nigeria (CBN), Yemi Cardoso, has assured that the ongoing series of monetary policy tightening measures implemented by the CBN will not be prolonged and will be eased once significant improvements are observed in key economic indicators such as inflation and the exchange rate.
Speaking after the conclusion of the CBN’s Monetary Policy Committee (MPC) meeting, Governor Cardoso, who also chairs the MPC, emphasized that the committee anticipates a temporary phase of interest rate tightening. As the reforms take effect, there will be a gradual relaxation of the Monetary Policy Rate (MPR).
He explained, “While the rise in interest rates may initially pose challenges for the economy, the concurrent decrease in the foreign exchange rate helps to mitigate its overall impact.” “I anticipate that this tightening phase will not be protracted, at least I hope so. We are moving towards a scenario where the exchange rate is stabilizing, and we expect it to reach a sustainable level. This will require significant collaboration with fiscal authorities, as monetary measures alone cannot address all aspects.”
Background:
During the recent MPC meeting, the CBN announced a 200 basis points increase in the interest rate, raising it from 22.75% to 24.75%. This decision follows a series of interest rate hikes by the CBN in previous MPC meetings, including a significant 400 basis points increase in February, raising the MPR from 18.75% to 22.75%. These actions have been aimed at curbing inflation and stabilizing the foreign exchange market. Since assuming office, Governor Cardoso has introduced various measures aimed at enhancing the value of the naira in the forex market.
