The Governor of the Central Bank of Nigeria (CBN), Yemi Cardoso, has acknowledged that the rise in the interest rate to 27.25% is “painful” for borrowers. He stressed that the decision is necessary to reduce excess money in circulation and control inflation effectively.
Cardoso stated this 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.”
The CBN chief stated that the apex bank understands that leadership involves making difficult decisions aimed at ensuring long-term stability, rather than focusing on short-term comfort.
He further emphasized that the bank must remain focused on its core mandate of ensuring price stability, rather than being swayed by political and economic pressures.
“Our decision to raise the Monetary Policy Rate to 27.25 per cent 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,” Cardoso said.
He noted that the CBN’s focus on core objectives, such as containing inflation, restoring credibility, and building public trust in the financial system, is critical to any meaningful recovery.
Cardoso’s remarks came as he reflected on his tenure as the head of the CBN, marking one year in office. He pointed out that trust is at the core of central banking, and without it, the effectiveness of the bank’s policies would diminish.
The CBN Governor also said introducing the Electronic Foreign Exchange Matching System is a key initiative to enhance transparency and restore market confidence.
“Trust is the currency of central banking. If the public loses trust in the institution, the efficacy of its policies diminishes. Our decision to implement the Electronic Foreign Exchange Matching System is rooted in this understanding.
“By enhancing transparency and providing more accurate oversight of forex transactions, we send a strong signal that the CBN is serious about fair and efficient markets,” he said.
Cardoso also revisited the bank’s controversial decision to float the naira, a move that was met with public criticism.
He explained that the decision was necessary to bring the official exchange rate closer to market reality and reduce speculative trading.
He asserted that the move had started stabilising the currency markets and reducing speculative trading.
While the CBN has yet to fully achieve its inflation targets, Cardoso expressed optimism, citing recent reports from the National Bureau of Statistics (NBS), which showed inflation had begun to decline in July and August 2024.
He acknowledged that the bank’s policies are gradually steering the economy in the right direction, though challenges remain.
