Nigeria’s Central Bank, led by Governor Olayemi Cardoso, has set a bold goal to reduce the nation’s inflation rate to around 21%. This ambitious target is a response to the country’s December inflation rate, which reached its highest level in over 27 years at 28.92%. To achieve this goal, the Central Bank of Nigeria (CBN) plans to adopt an inflation-targeting policy, a significant departure from previous unconventional approaches.
Governor Cardoso acknowledged the challenges ahead and emphasized the importance of increasing agricultural output and resolving global supply chain issues. These steps are expected to improve consumer confidence and enhance purchasing power. The CBN’s shift towards more traditional monetary strategies aligns with President Bola Tinubu’s broader economic reforms, such as eliminating petrol subsidies and making adjustments to currency trading restrictions.
In addition to tackling inflation, the Central Bank of Nigeria aims to correct the undervaluation of the Nigerian naira. Governor Cardoso expressed confidence in the naira’s inherent value and outlined a coordinated approach to achieve a balanced and stable exchange rate. This plan involves implementing monetary and fiscal measures to facilitate accurate price discovery in the short term.
The CBN is also actively working to improve liquidity in the foreign exchange market. Governor Cardoso reiterated the bank’s commitment to fulfilling outstanding foreign exchange obligations, having already paid off at least $2 billion of the estimated $7 billion owed. This effort aims to narrow the gap between the official and parallel market exchange rates, which has been a longstanding issue contributing to Nigeria’s forex shortage.
Despite these proactive measures, the Central Bank of Nigeria faces challenges, particularly the forex shortage and the disparity between official and parallel market exchange rates. Analysts anticipate pressure on the CBN to raise interest rates during the upcoming rate-setting meeting, which will be Governor Cardoso’s first since assuming office. This decision could have far-reaching implications for the country’s economy.
Looking ahead, Governor Cardoso’s leadership signals a new era in Nigeria’s economic management. The combination of targeted inflation reduction and adjustments to the naira’s valuation is expected to address some of the key issues facing Africa’s largest economy.