The Governor of the Central Bank of Nigeria, Olayemi Cardoso, has stated that it will soon be able to slow down increases in the benchmark interest rate.
Cardoso said that 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.
The CBN governor, represented by the CBN’s Deputy Governor of Financial Stability, Phillip Ikeazor, said that it was important to keep the rates up to curtail the risk of hyperinflation and its consequences.
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 had in May stated the apex bank would sustain interest rate hikes until inflation was tamed.
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 remarked.
According to the National Bureau of Statistics, in May 2024, the headline inflation rate increased to 33.95 per cent relative to 33.69 per cent in April.
