Yemi Cardoso, the Governor of Central Bank of Nigeria (CBN), has acknowledged the challenges that come with the recent upward adjustment of the interest rates to 27.75%, particularly to fight inflation and ensure sustained economic growth.
In a meeting with members of the Harvard Club of Nigeria, Cardoso mentioned that price stability was the core objective of the CBN and reflected on the need for leadership during difficult moments. He asserted that, even though it is painful to borrowers, higher interest rates serve the purpose of mopping up excess liquidity in the system and controlling inflation.
He stressed, in addition, that while there was a build-up of inflationary expectations, there was also a need for the bank to maintain focus on the position of the policy and implement the Electronic Foreign Exchange Matching System (EFEMS) policy to re-establish confidence in the markets and in the system.
All these measures are designed to curtail arbitrage and speculation, restoring trust among participants.
Under the leadership of Cardoso, Nigeria has seen five adjustments in interest rates, equivalent to over 800 basis points, in an effort to tame rising inflation rates in the country. The most recent adjustment, a 50 basis points increase to 27.75%, illustrates how the CBN is striving to stabilise the economy.
