LAGOS, Nigeria (VOICE OF NAIJA)-The Central Bank of Nigeria (CBN) Governor, Mr. Olayemi Cardoso, has defended the bank’s decision to increase the Monetary Policy Rate to 27.25 percent, calling it a necessary action to manage inflation and limit excessive money circulation.
This was reported in a press statement issued by the apex bank on Sunday.
During a speech at the Harvard Club of Nigeria over the weekend, Cardoso stressed that although the rate hike poses challenges for borrowers, it is essential for the economic stability of the country.
“Our decision to raise the Monetary Policy Rate to 27.25 per cent was a bold move. Higher interest rates, while painful for borrowers, are necessary to curb excess money in circulation and control inflation. Leadership is about making hard choices to secure long-term stability over short-term comfort in moments like these,” Cardoso said.
He highlighted that the Central Bank of Nigeria’s emphasis on core objectives such as controlling inflation, restoring credibility, and fostering public trust in the financial system is vital for any significant recovery.
Cardoso made these comments while reflecting on his first year in office as the head of the CBN.
He emphasized that trust is fundamental to central banking; without it, the effectiveness of the bank’s policies would be compromised.
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Additionally, the CBN Governor stated that the launch of the Electronic Foreign Exchange Matching System is a crucial initiative aimed at increasing transparency and restoring confidence in the market.
“Trust is the currency of central banking. If the public loses trust in the institution, the efficacy of its policies diminishes. Our decision to implement the Electronic Foreign Exchange Matching System is rooted in this understanding.
“By enhancing transparency and providing more accurate oversight of forex transactions, we send a strong signal that the CBN is serious about fair and efficient markets,” he said.
Cardoso also revisited the bank’s controversial decision to float the naira, which received significant public backlash.
He explained that this decision was essential for aligning the official exchange rate with market realities and diminishing speculative trading.
He affirmed that the move has begun to stabilize the currency markets and lessen speculative activities.
While the CBN has not yet fully met its inflation targets, Cardoso expressed optimism, referencing recent reports from the National Bureau of Statistics (NBS) indicating that inflation started to decrease in July and August 2024.
He acknowledged that the bank’s policies are gradually steering the economy in the right direction, although challenges still persist.