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In the face of persistent price volatility, the Central Bank of Nigeria (CBN) has outlined an ambitious goal, targeting a 21.4% inflation rate for the year 2024. CBN Governor Yemi Cardoso emphasized that the local currency, the naira, is currently deemed relatively undervalued.
Speaking at an event hosted by the Nigerian Economic Summit Group, Cardoso detailed the CBN’s commitment to implementing an inflation-targeting policy to curb inflation and achieve a rate of 21.4% in 2024. The apex bank, which had historically maintained an inflation-targeting policy range of 6-9%, witnessed shifts in policies during the tenure of former President Muhammadu Buhari, contributing to heightened inflation levels.
Cardoso, who assumed office in September, is under pressure to address inflation concerns, with rates reaching 28.92% in December, the highest in over 27 years. The forthcoming rate-setting meeting in the coming month will be closely watched for potential adjustments.
“Inflationary pressures are expected to decline in 2024 due to the CBN’s inflation-targeting policy, which aims to rein in inflation to 21.4%,” stated Cardoso during his speech. He highlighted factors such as enhanced agricultural output and a reduction in global supply chain pressures as contributors to the anticipated decline, fostering increased consumer confidence and purchasing power.
The CBN, under Cardoso’s leadership, is anticipated to adopt a more conventional monetary policy approach, moving away from the unconventional strategies pursued by his predecessor, Godwin Emefiele. In November, Cardoso announced the adoption of an inflation-targeting framework, aligning the central bank with global best practices.
President Bola Tinubu, assuming office last year, implemented a series of reforms, including the removal of a petrol subsidy and easing currency trading restrictions. Despite these reforms, the country grapples with forex shortages and contends with a significant gap between official and parallel market exchange rates.
“We believe that the naira is currently undervalued, and, coupled with coordinated measures on the fiscal side, we will expedite genuine price discovery in the near term,” affirmed Cardoso. He emphasized the importance of a coordinated approach, aiming for a more balanced and stable exchange rate.
Addressing concerns over forex liquidity, Cardoso reiterated the CBN’s commitment to enhancing liquidity in the foreign exchange market. He further pledged to clear outstanding FX obligations, with at least $2 billion already paid out of the estimated $7 billion owed.
In summary, the CBN, under its new leadership, sets forth an ambitious inflation target, aligning its policies with a focus on stability, balanced exchange rates, and coordinated fiscal measures to drive genuine price discovery.
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