Governor of the Central Bank of Nigeria (CBN), Mr Olayemi Cardoso has expressed concerns on how the continued hike of interest rates may make the country unattractive for investments.
The Governor was expressing his concerns while commenting on the Apex’s Bank strategy to tame inflation in the country in a chat with Financial Times.
Recall that the National Bureau of Statistics (NBS) recently disclosed that Nigeria’s headline inflation witnessed an increase to 33.20 percent in March 2024.
The NBS said this in its Consumer Price Index (CPI) and Inflation Report for March.
According to the report, the figure is 1.50 percent points higher compared to the 31.70 percent recorded in February 2024.
It said on a year-on-year basis, the headline inflation rate in March 2024 was 11.16 percent higher than the rate recorded in March 2023 at 22.04 percent.
In addition, the report said, on a month-on-month basis, the headline inflation rate in March 2024 was 3.02 percent, which was 0.10 percent lower than the rate recorded in February 2024 at 3.12 percent.
Cardoso said he hoped that high rates would not “linger” for too long and act as a disincentive to investment and production.
However, he said that raising rates 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,” he explained.
The Governor also stated that the members of the Monetary Policy Committee (MPC) would not relent in their efforts to address Nigeria’s persistent inflation.
During the interview, the CBN governor told the Financial Times that there was “every indication” that the monetary policy committee would “do whatever is necessary” to keep soaring inflation in check.
“They will continue to do what has to be done to ensure that inflation comes down,” he said.
The next MPC meeting is slated for May 20-21, as there are projections of a rate hike from the committee, even as inflation is forecast to rise.
Cardoso said he hoped that high rates would not be for too long and discourage investment and production.
He maintained that raising rates had been essential.
On fluctuations in the naira in recent times, the CBN governor said investors, who were likely to exit the economy in response to currency fluctuations, were now more comfortable with the market. He 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.”