Nigeria’s newly-appointed central bank governor, Olayemi Cardoso, has revealed a comprehensive plan to tighten monetary policy over the next two quarters. The initiative aims to curb the persistently rising inflation, which reached a staggering 27.33% in October, the highest in nearly two decades.
In a landmark shift, Cardoso announced the cessation of direct fiscal interventions that had previously blurred the lines between monetary and fiscal policies. This move is seen as a departure from the unconventional strategies employed by his predecessor, Godwin Emefiele. Instead, Cardoso emphasized the adoption of an explicit inflation-targeting framework to enhance the effectiveness of monetary policy.
With aspirations for Nigeria’s economy to grow to $1 trillion in the next seven years, Cardoso urged banks to bolster their capital positions to support the envisioned expansion. The central bank’s commitment to price and financial system stability was emphasized, with a focus on addressing institutional deficiencies, restoring corporate governance, and implementing prudent policies.
President Bola Tinubu’s recent bold reforms, including the elimination of petrol subsidies and the abandonment of multiple exchange rates, were acknowledged by Cardoso. Despite the challenges posed by these reforms, he anticipates that they will contribute to a stable exchange rate and improve overall macroeconomic stability.
In line with the commitment to transparency, Cardoso expressed intentions to allow market forces to determine exchange rates. He assured stakeholders that new foreign exchange guidelines would be developed in consultation with banks and FX operators before implementation.
