The Governor of the Central Bank of Nigeria (CBN), Yemi Cardoso has stated that the current spate of monetary policy tightening measures by the CBN will not be long drawn and will be relaxed once there are substantial improvements in the economy in terms of inflation and exchange rate.
The Governor who doubles as the Chairman of the apex bank’s Monetary Policy Committee (MPC) stated this while addressing members of the press at the end of the CBN’s MPC meeting.
According to him, the committee does not expect a long-drawn interest rate tightening and as the reforms being implemented take effect, there will be relaxation in MPR.
- He stated, “While the increase in interest may have tendencies of strangulating the economy, with the foreign exchange rate coming down, that also helps to moderate it overall.”
- “And I said earlier, you would expect that this would not be too long drawn at least I would hope so. We are getting towards a situation where the exchange rate, it is moderating, and we are expecting it to moderate and then it find a level which quite frankly is sustainable. This would involve huge collaboration with the fiscal side because a lot of that cannot just rely on the monetary side alone”
Backstory
The CBN during its just concluded Monetary Policy Committee (MPC) meeting announced the hike of interest rate from 22.75% to 24.75%- a 200 basis points increase.
The move follows consistent MPR hikes from the apex bank in the last few MPC meetings with the highest being the 400basis points increase in February which pushed the MPR from 18.75% to 22.75%.
The bank had always attributed its decision to hike MPR as part of measures to tame inflation and stabilise the foreign exchange rate. Since assuming office, the current Governor of the CBN has introduced a slew of measures geared towards improving the value of the naira on the forex market.
