Interest rates to remain high until inflation is tamed — Cardoso

The Governor of the Central Bank of Nigeria, CBN, Olayemi Cardoso, has said that interest rates will remain high until the inflation rate is tamed.

Cardoso, who said that the CBN Monetary Policy Committee, MPC, was taking all necessary measures to combat inflation, disclosed that conventional policies would be put in place to address the problem.

Nigeria’s inflation rate climbed to 33.20 per cent in March, up from 31.70 per cent in February, prompting the CBN Monetary Policy Committee to increase the interest rate by 200 basis points in March to 24.75 per cent.

Speaking on the matter, Cardoso said: “They will continue to do what has to be done to ensure that inflation comes down. 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.”

According to him, the apex bank had been “reoriented” to focus on “price and monetary stability”, stating that the official window of the foreign exchange (FX) market has been brought to a stable state.

He said investors previously had a “tendency to head for the window” in response to currency fluctuations, however, there has been a “fundamental shift”.

He noted 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.