Olayemi Cardoso, the governor of the Central Bank of Nigeria (CBN), has made it clear that the high interest rate will soon be lowered when the anticipated inflationary pressure subsides.
Cardoso revealed this when giving the keynote speech at the annual dinner of the Chartered Institute of Bankers of Nigeria (CIBN), which took place at the Eko Hotel in Lagos on November 29, 2024.
Cardoso claimed that this year’s cumulative increase in the Monetary Policy Rate (MPR) by 875 basis points to 27.5% was a “critical step” in containing inflation and re-establishing stability.
The head of the CBN acknowledged the difficulties that families and businesses face due to rising interest rates, but he pointed out that these actions are not meant to last.
The CBN Governor’s Remarks
During his remarks, Cardoso stated,
- ’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 To Note
- Since taking office, Cardoso, who was named CBN Governor by President Bola Tinubu in September 2023, has aggressively raised interest rates to combat the rising pace of inflation.
- In its Consumer Price Index (CPI) report, the National Bureau of Statistics (NBS) reported that Nigeria’s headline inflation rate increased from 32.7% in September 2024 to 33.88% in October 2024.
- The NBS said rising food prices and transit expenses were to blame for the inflation spike.
- The rate was 6.55 percentage points higher on an annual basis than the 27.33% recorded in October 2023, indicating a significant rise in inflation over the previous 12 months.
- In an effort to combat the nation’s soaring inflation, the CBN raised its interest rate earlier this week by 25 basis points, from 27.25% to 27.50%.
- Cardoso, who is also the Chairman of the Monetary Policy Committee (MPC), made this announcement at the end of the committee’s Abuja meeting. The interest rate was raised by 25 basis points to 27.50% from its previous level in September after the MPC unanimously approved the move.
- After rising from 18.75% to 22.75%, the rate was raised to 24.75% and then to 26.25%. The rate was raised by 50 basis points to 26.75% in July 2024.
- The MPC raised the rate by a further 50 basis points in September, bringing it to 27.25%.
