CBN Governor Signals Easing of High Interest Rates as Inflation Cools

In a recent address at the Bankers’ Night hosted by the Chartered Institute of Bankers of Nigeria (CIBN) in Lagos, the Governor of the Central Bank of Nigeria (CBN), Olayemi Cardoso, gave a clear signal that high interest rates would be eased in the coming months if inflation pressures cool as expected. Cardoso emphasized that the CBN’s cumulative 875 basis points of rate increases this year were an “essential move” to contain inflation and restore stability, assuring his audience that relief was on the way.

“These measures are not intended to be permanent,” Cardoso stated. “We are closely monitoring the data, and as inflation shows sustained signs of improvement – something we expect in the near future – we will adjust rates accordingly.”

Reforms and Inflation Management

Cardoso, who was installed by President Bola Tinubu in September 2023, used his speech at the same dinner last year to pledge a return to orthodox monetary policy. Since then, he has allowed the naira to trade more flexibly against the dollar and pursued aggressive interest-rate increases to curb rising inflation. Despite the naira losing about 70% of its value since Tinubu loosened its longstanding peg against the dollar in 2023, it has narrowed the gap between where it trades on the official versus unofficial market, while capital inflows have increased.

“Our tight monetary policy stance has altered the previous dire trajectory, and we expect a downward trend in 2025,” Cardoso said. “Inflation remains unacceptably high, but the signs are encouraging, particularly given that the full effects of monetary policy typically take six to nine months to impact the consumer sector.”

Addressing Transaction Hitches and the ‘Japa’ Trend

During his address, Cardoso also touched upon recent transaction hitches in the banking sector, issuing a stern warning to banks that fail to improve their processes. He announced that from December 1, customers would be further empowered to report banks that are failing in their responsibility, and the CBN would take such reports seriously.

Acknowledging the impact of the ‘japa’ trend on the financial system, Cardoso insisted that it presents a rare opportunity to reinvent the system. He emphasized the need to rebuild the competency framework, re-educate staff, and return to best practice training, stating that re-education is critical.

Building an Economy for All

Cardoso disclosed that Nigeria lost a staggering N6.2 trillion to the rigid foreign exchange (FX) rate regime in 2022 alone, surpassing the N4.5 trillion lost to fuel subsidy. He highlighted the positive impact of market liberalization, revealing that the daily turnover of FX rose by over 200 percent year-on-year in the first half of the year, and foreign capital inflow also improved remarkably, validating the rising confidence in the process.

The CBN Governor concluded by reaffirming the central bank’s commitment to building an economy where every business, individual, and community can thrive. He acknowledged the tough challenges ahead but expressed optimism that the country could achieve its dream through collective action.