In a recent address to the House of Representatives in Abuja, Olayemi Cardoso, the Governor of the Central Bank of Nigeria (CBN), projected a significant decrease in the country’s inflation rate.
Cardoso stated that Nigeria’s inflation rate, currently at 28.92%, is expected to drop to 21.4% in 2024. This decline, he emphasized, is attributed to the implementation of inflation-targeting policies by the federal government.
Cardoso highlighted key factors contributing to this projected decrease, including improvements in agricultural productivity and the easing of global supply chain pressures. He emphasized the importance of the CBN’s inflation-targeting framework, which involves close collaboration with fiscal authorities to achieve price stability. This, he believes, could potentially lead to lowered policy rates, stimulate investment, and create job opportunities.
Addressing concerns about the Nigerian foreign exchange market, Cardoso acknowledged increased demand pressures leading to a continuous decline in the value of the naira. He attributed these pressures to factors such as speculative forex demand, inadequate forex supply due to delays in remittance of crude oil earnings to the CBN, increased capital outflows, and excess liquidity from fiscal activities.
In response to exchange rate volatility, Cardoso outlined a comprehensive strategy aimed at enhancing liquidity in the FX markets. This strategy includes measures such as unifying FX market segments, clearing outstanding FX obligations, introducing new operational mechanisms for Bureaux De Change (BDCs), enforcing the Net Open Position (NOP) limit, and adjusting the remunerable Standing Deposit Facility cap.
While acknowledging the short-term costs associated with these measures, Cardoso reassured that they are temporary and intended to address fundamental issues in Nigeria’s macroeconomic landscape. He expressed confidence that the steps taken will ultimately lead to a more market-oriented mechanism for exchange rate determination, boosting foreign exchange inflows, stabilizing the exchange rate, and minimizing its impact on domestic inflation.
Overall, Cardoso’s address underscores the CBN’s commitment to implementing policies aimed at achieving macroeconomic stability and fostering economic growth in Nigeria.