CBN Targets Inflation Control: Cardoso Hints at Lower Interest Rates Ahead
The Central Bank of Nigeria (CBN) Governor, Olayemi Cardoso, has indicated that the current elevated interest rates may soon decrease as inflationary pressures are expected to ease.
Cardoso shared this insight during his keynote address at the Chartered Institute of Bankers of Nigeria (CIBN) annual dinner, held on November 29, 2024, at the Eko Hotel in Lagos.
Key Actions to Address Inflation
In his address, Cardoso emphasized that the cumulative increase in the Monetary Policy Rate (MPR) by 875 basis points to 27.5% this year was a critical step to address inflation and stabilize the economy. Reflecting on this policy move, he stated:
“To tackle the pressing issue of inflation, the CBN raised the Monetary Policy Rate by 875 basis points to 27.5% in 2024—an essential measure to contain inflation and bring stability. Borrowing from Winston Churchill’s sentiment on problem-solving tools: interest rates may be far from ideal for combating inflation, yet they remain our best option in the absence of better alternatives.
“I acknowledge the difficulties that higher interest rates impose on businesses and families. However, these measures are not designed to last indefinitely. We are carefully analyzing the data, and as inflation shows consistent improvement—a development we anticipate soon—we will adjust rates accordingly.”
He further noted that the central bank’s strict monetary stance had reversed the previous unfavorable trend, with signs pointing to a downward inflation trajectory in 2025. While inflation levels remain high, Cardoso assured Nigerians of the CBN’s dedication to price stability until its positive effects are broadly experienced.
Recent Inflation Trends and Policy Adjustments
Since his appointment as CBN Governor in September 2023 by President Bola Tinubu, Cardoso has implemented a series of aggressive interest rate hikes to combat rising inflation.
The National Bureau of Statistics (NBS) reported a significant increase in the headline inflation rate, which reached 33.88% in October 2024, up from 32.7% in September. Factors driving this rise included higher transportation costs and escalating food prices. On an annual basis, inflation was 6.55 percentage points higher than the 27.33% recorded in October 2023, reflecting a notable surge over the past year.
To address these challenges, the Monetary Policy Committee (MPC), chaired by Cardoso, has raised the MPR multiple times. Earlier this week, the rate was increased by 25 basis points from 27.25% to 27.50%. These decisions align with the CBN’s broader strategy to rein in inflation.
The incremental hikes throughout the year included:
Raising the rate from 18.75% to 22.75%.
Further increases to 24.75% and 26.25%.
A 50 basis point hike in July to 26.75%.
An additional 50 basis points in September to 27.25%.
The most recent adjustment to 27.50%.
Cardoso and the MPC remain committed to leveraging monetary tools to stabilize the economy and curb inflation in the long term.