The Governor of the Central Bank of Nigeria (CBN), Olayemi Cardoso, has indicated that the country’s high interest rates will soon be reduced as inflationary pressures begin to subside. Cardoso disclosed this during his keynote address at the Chartered Institute of Bankers of Nigeria (CIBN) annual dinner held on November 29, 2024, at Eko Hotel, Lagos.
Cardoso described the cumulative increase of the Monetary Policy Rate (MPR) by 875 basis points to 27.5% in 2024 as a necessary step to combat inflation and stabilize the economy.
Acknowledging the strain high interest rates place on businesses and households, he emphasized that these measures are temporary and reassured Nigerians that the central bank would ease rates once inflation shows consistent improvement.
Key Highlights from Cardoso’s Address:
• On Tackling Inflation:
“To address the pressing challenge of inflation, the CBN acted decisively by raising the Monetary Policy Rate by 875 basis points to 27.5% in 2024. This was an essential move to restore economic stability.”
• On the Temporary Nature of High Rates:
“As Winston Churchill aptly put it, interest rates may be the least desirable tool to combat inflation—except for all the others. While we recognize the challenges these rates impose, they are not intended to be permanent. As inflation demonstrates sustained improvement, we will adjust rates accordingly.”
• On Outlook for 2025:
“Our tight monetary policy stance has successfully shifted the trajectory, and we anticipate a downward trend in inflation in 2025. Though inflation remains unacceptably high, the signs are encouraging, especially as monetary policy effects typically take 6-9 months to materialize. Our commitment to price stability remains unwavering, ensuring its benefits reach every Nigerian.”
Background on Inflation and Interest Rates:
• Since assuming office in September 2023, Cardoso has pursued aggressive interest rate hikes to curb inflation, which rose to 33.88% in October 2024 from 32.7% in September, according to the National Bureau of Statistics (NBS). The increase was primarily attributed to rising transportation costs and higher food prices.
• Over the past year, inflation climbed by 6.55 percentage points compared to October 2023’s rate of 27.33%.
• The CBN recently raised the MPR by 25 basis points to 27.50%, the latest in a series of hikes throughout 2024.
Interest Rate Increases in 2024:
• July 2024: The rate was raised by 50 basis points to 26.75%.
• September 2024: A further 50 basis point hike brought the rate to 27.25%.
• November 2024: The Monetary Policy Committee (MPC) unanimously approved another 25 basis point increase, pushing the MPR to its current level of 27.50%.
As inflation shows signs of easing, Nigerians can expect gradual adjustments in monetary policy aimed at fostering economic growth and reducing financial pressures.
