Emmanuel Ochayi
Inflation Control Critical, Says CBN Governor
The Governor of the Central Bank of Nigeria (CBN), Dr. Olayemi Cardoso, recently declared that the institution aims to slow down the increases in the benchmark interest rate soon.
Prime Business Africa reports that Cardoso made this announcement in Lagos during 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.
Join our WhatsApp ChannelRepresented by the CBN’s Deputy Governor of Financial Stability, Phillip Ikeazor, Cardoso stressed the significance of maintaining high rates to mitigate the risks of hyperinflation and its consequences.
“Once you do not tame and control inflation and you get into hyperinflation, it takes you several years to get out of it,” Ikeazor explained. “There is still a South American country with significant oil reserves in hyperinflation, and we all know the struggles they face. Another country in East Africa is also in hyperinflation, and they are struggling too.”
CBN’s Focus on Core Mandates
Ikeazor emphasised that the CBN is dedicated to its core mandates of price stability, maintaining a stable exchange rate, and fostering economic growth.
“It is crucial that we avoid entering hyperinflation,” he stated. “Once you enter hyperinflation, the transmission of monetary economic tools becomes completely ineffective.”
On the duration of the rate hikes, Ikeazor noted, “This will continue until we can control and reverse galloping inflation.
Once we achieve that, we will maintain the rates. In the Western world, they had rate hikes to control inflation and maintained them for a long time. They have only now stopped rate hikes but haven’t started dropping the rates.”
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Cardoso, in a May statement, reiterated the CBN’s commitment to sustaining interest rate hikes until inflation is under control. He mentioned in a Financial Times report that the Monetary Policy Committee (MPC) would “do whatever is necessary” to curb inflation.
Recent Economic Indicators and Measures
According to the National Bureau of Statistics, the headline inflation rate in Nigeria rose to 33.95 percent in May 2024, up from 33.69 percent in April.
In response, the CBN’s Monetary Policy Committee increased the benchmark lending rate by 150 basis points to 26.25 percent from 24.75 percent.
Former President Olusegun Obasanjo advocated for a synergy between fiscal and monetary policies to revolutionise the banking industry and achieve economic stability.
Represented by former Cross River governor Donald Duke, Obasanjo stated, “To sustain this growth, there must be appropriate consultations between fiscal and monetary authorities.”
Support for Economic Measures
Lagos State Governor Babajide Sanwo-Olu praised Soludo’s efforts but highlighted current economic challenges.
He urged the CBN to take decisive actions to stabilise the economy, particularly in managing interest rates and inflation, to alleviate pressures faced by the private sector.
“The private sector is currently experiencing tough times due to various economic challenges,” Sanwo-Olu said. “The CBN must take swift and effective measures to stabilize the economy. Learning from past reforms can guide us through these turbulent times.”
Soludo, reflecting on the challenges faced during the 2005 consolidation, expressed pride in the achievement and urged the current CBN leadership to remain resolute in their efforts to recapitalise the banks to keep pace with the expanding economy.
