Olayemi Cardoso, governor of the Central Bank of Nigeria (CBN), has hinted interest rates would remain high until inflation rate subsides.
In a Financial Times report
on Monday, Cardoso also said orthodox policies would be implemented to tame
inflation.
In March, Nigeria’s inflation rate rose to 33.20 percent —
from 31.70 percent in February.
Consequently, CBN’s monetary policy committee (MPC) raised
the interest rate by 200 basis points in March to 24.75 percent.
Cardoso said there is “every indication” that MPC would “do
whatever is necessary” to rein inflation.
“They will continue to do what has to be done to ensure that
inflation comes down,” Cardoso said.
“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.”
Cardoso said the apex bank had been “reoriented” to focus on
“price and monetary stability”.
He said the official window of the foreign exchange (FX)
market has been stabilised.
According to the governor, investors previously had a
“tendency to head for the window” in response to currency fluctuations,
however, there has been a “fundamental shift”.
“They’re getting more
comfortable with the market,” Cardoso said.
The naira fell to its lowest level of N1,627.40/$ in the
official FX window on March 8 but rallied to N1,154.08/$ on April 18 — after
which the local currency began to lose its gains.
As of May 10, the official FX rate stood at N1,466.31/$.
Also, Cardoso maintained that raising interest rates has
been crucial.
He hoped that high interest rates would not linger for too
long and act as a disincentive to investment and production.
“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,” he said.
He said inflation was higher than he had hoped, blaming
“distortions” mainly due to high food prices.
Cardoso said it is not directly within CBN’s control.
Food inflation rose to 40.01 percent in March, compared to
the 24.45 percent rate recorded in the same month last year.
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