By 
Olayemi Cardoso, the Governor of the Central Bank of Nigeria (CBN), clarified the recent increase in interest rates, citing it as a response to existing inflationary pressures and the imperative to stabilize the Naira. Cardoso provided insights during a press briefing following the first Monetary Policy Committee (MPC) meeting held in Abuja.
He outlined the committee’s decisions, which were centered on addressing inflationary and exchange rate challenges, projected inflation rates, and escalating inflation expectations. Concerns about the sustained increase in inflation levels led the committee to emphasize its commitment to reversing the trend, acknowledging the inherent trade-off between pursuing output growth and curbing inflation.
While recognizing the challenges, the committee expressed conviction that achieving enduring output expansion requires a low and stable inflation environment. Cardoso highlighted the decision to transition to an inflation targeting framework, considering it essential to addressing persistent inflationary pressures. He commended the fiscal authority for its support in this regard.
Discussing the available options, Cardoso noted that the committee deliberated on holding or increasing the policy rate to counter ongoing inflationary pressures. Evaluating the impact of previous policy rate hikes, the committee observed a slowdown in the rise of inflation but not to the desired extent.
After considering various scenarios of holding and hiking, the committee concluded that persistent inflation in the medium-term could pose regulatory challenges if not effectively addressed. The consensus leaned convincingly toward a significant policy rate hike as the preferred option to substantially reduce inflation. Cardoso emphasized the committee’s commitment to implementing measures to mitigate inflationary pressures in the economy.
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