Economy
Cardoso Signals More Rate Hikes Ahead of MPC Meeting
By Adedapo Adesanya
The Governor of the Central Bank of Nigeria (CBN), Mr Yemi Cardoso, in his latest comments, has hinted at the intention of the bank to further keep interest rates high until inflation subsides by implementing orthodox policies.
Mr Cardoso, in an interview with the Financial Times, said that the Monetary Policy Committee (MPC), which is set to meet next week, would do whatever is necessary to tame soaring inflation.
Under Mr Cardoso, the apex bank has hiked interest rates by a total of 600 basis points from 18.75 per cent to 24.75 per cent.
It would be recalled that the monetary policy rate was hiked by 400 and 200 basis points in February and March respectively, which lifted the key lending rate to the current level.
This is as the inflation rate in Nigeria remains high at 33.2 per cent, the highest in 28 years, while food inflation is higher still at 40 per cent.
“There is every indication that the MPC would do whatever is necessary. They will continue to do what has to be done to ensure that inflation comes down.
“Let’s face it: for a long period, 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. The apex bank has been reoriented to focus on price and monetary stability,” Mr Cardoso said.
Mr Cardoso also said he hoped that high rates would not linger for too long and act as a disincentive to investment and production but noted that it had been essential.
“Hiking interest rates obviously has had a dampening effect on the foreign exchange market, so that has begun to moderate. It’s not a zero-sum game. You lose on one side, you get on the other.”
Speaking on the fluctuating value of the Naira against the US Dollar, Mr Cardoso said the situation had now stabilised due to the recent policy thrusts.
“Investors had previously tended to head for the window in response to currency fluctuations. But now, there had been a fundamental shift. They’re getting more comfortable with the market,” he stated in the interview.
