Cardoso defends Nigeria’s tough economic reforms as inflation eases

Central Bank of Nigeria (CBN) Governor Olayemi Cardoso has defended the government’s economic reforms and the apex bank’s aggressive interest rate hikes, saying the measures helped bring inflation down from above 30 per cent to about 15 per cent.

Speaking during a debate on the global economy themed “Forging Resilient and Dynamic Economies for the Future,” Cardoso said the removal of fuel subsidies and changes to the foreign exchange system initially fuelled inflation but were necessary to address longstanding economic problems.

He said the country had been grappling with currency crises and declining investor confidence, leaving the new administration with limited options.

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According to him, the reforms were accompanied by aggressive monetary tightening in 2024, even as several other economies were easing their monetary policies.

“We did a 400-basis-point hike in one go, and within that year, we did about 800,” Cardoso said.

He said the interest rate increases, alongside measures to improve transparency and address distortions in the foreign exchange market, contributed to the subsequent easing of inflation.

Cardoso also said Nigeria’s foreign reserves had risen to their highest level in 18 years, attributing the development partly to renewed investor confidence.

The CBN governor acknowledged that the reforms came at a cost but argued that policy consistency and clearer communication helped the bank maintain market confidence.

He said the apex bank had also identified a gap between its monetary policy rate and the rates at which monetary policy decisions were transmitted through the financial system.

Cardoso said the bank moved to address the disconnect, adding that investors did not react with the level of panic that might have been expected because they understood the rationale behind the adjustment.

“The markets knew that there was a disconnect, and we closed that gap, so they did not necessarily panic,” he said.

He attributed the market response partly to confidence in the CBN’s ability to implement its policies consistently.