By 
Olayemi Cardoso, Governor of the Central Bank of Nigeria (CBN), has described the recent decision to raise the Monetary Policy Rate (MPR) to 27.25% as a necessary but challenging step in the fight against inflation. Speaking in Lagos during an address to members of the Harvard Club of Nigeria, Cardoso explained that while higher interest rates may be difficult for borrowers, they are essential to reducing excess liquidity in the economy and curbing inflationary pressures.
“Higher interest rates, though painful for borrowers, are necessary to curb excess money in circulation and control inflation,” Cardoso stated, acknowledging that leadership often requires difficult choices that prioritize long-term stability over short-term comfort.
During the event, themed ‘Leadership in Challenging Times: Restoring Credibility, Building Trust and Containing Inflation,’ Cardoso emphasized the CBN’s commitment to restoring trust in Nigeria’s financial system. He highlighted the introduction of the Electronic Foreign Exchange Matching System (EFEMS) as a key initiative aimed at enhancing transparency and oversight in the country’s foreign exchange market.
“Trust is the currency of central banking. If the public loses trust in the institution, the efficacy of its policies diminishes,” Cardoso said. He added that the EFEMS would help reinforce fair and efficient forex markets, sending a clear message that the CBN is serious about ensuring market integrity.
Reflecting on his first year in office, Cardoso stressed that his leadership has been centered on making tough but necessary decisions to restore credibility at the CBN. He noted that the decision to float the naira—despite public criticism—was crucial to closing the gap between the official and parallel exchange rates, which had fueled speculative trading and eroded market confidence.
“Credibility is earned by consistency,” he remarked, explaining that although the move was unpopular, it signaled the CBN’s commitment to sound monetary policy and transparency. He noted that since the decision, speculative trading has decreased, and stability is gradually returning to the currency markets.
Addressing the ongoing inflationary challenges, Cardoso acknowledged that while the CBN has yet to meet its inflation targets, recent declines reported by the National Bureau of Statistics (NBS) in July and August 2024 indicate progress. He reiterated that containing inflation remains the CBN’s core mission and emphasized that the bank is dedicated to achieving sustainable economic recovery through transparent and consistent policies.
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