The Governor of the Central Bank of Nigeria (CBN) Mr Olayemi Cardoso, has defended the decision of the apex bank to float the naira since he assumed office in the past one year.
While addressing members of the Harvard Club of Nigeria in Lagos at the weekend on the topic: “Leadership in Challenging Times: Restoring Credibility, Building Trust, and Containing Inflation,” Cardoso recalled that upon assumption of duty, Cardoso argued that the decision to float the Naira is working and restoring gradual stability to currency markets
He further explained that the floatation policy was meant to address the disparity between the official and parallel rates which encouraged arbitrage and speculation, eroding trust in the market.
He stated, “Without credibility, no policy, however well-intentioned, can succeed. Floating the naira, a decision met with considerable public criticism, was necessary to bring the official exchange rate closer to market reality.
“The disparity between the official and parallel rates had encouraged arbitrage and speculation, eroding trust in the market.
“Credibility is earned by consistency. The decision to close this gap, while painful in the short term, sent a message to market participants that the CBN was committed to transparency and sound monetary policy,” he added, noting that speculative trading had been reduced, and stability was gradually returning to the currency markets.
While noting that containing inflation remained the Bank’s core mission, he acknowledged that the CBN was yet to meet its target.
However, he stressed that recent declines reported by the National Bureau of Statistics (NBS) in July and August 2024 showed that the CBN was moving in the right direction.
He explained further, “Our decision to raise the Monetary Policy Rate (MPR) to 27.25 percent was a bold move. Higher interest rates, while painful for borrowers, are necessary to curb excess money in circulation and control inflation. Leadership is about making hard choices to secure long-term stability over short-term comfort in moments like these.”