The Governor of the Central Bank of Nigeria (CBN), Yemi Cardoso, acknowledged the challenges posed by the recent increase in the interest rate to 27.25%, labeling it a “painful” reality for borrowers. However, he emphasized that this decision is crucial for reducing excess money in circulation and effectively controlling inflation.
Cardoso made these remarks during a recent address to the Harvard Club of Nigeria in Lagos, focusing on the theme “Leadership in Challenging Times: Restoring Credibility, Building Trust, and Containing Inflation.” He noted that leadership often requires making difficult choices aimed at ensuring long-term stability rather than prioritizing immediate comfort.
“Our decision to raise the Monetary Policy Rate (MPR) to 27.25% was a bold move,” Cardoso stated. He explained that while higher interest rates can be burdensome for borrowers, they are essential for managing the current economic situation. He further underscored the importance of the CBN’s core mandate—ensuring price stability—over succumbing to political and economic pressures.
“Leadership is about making hard choices to secure long-term stability over short-term comfort in moments like these,” Cardoso stressed. He added that navigating challenging times requires a focused approach, cautioning against the temptation to pursue too many initiatives.
In his efforts to restore trust in the CBN, Cardoso highlighted the new leadership’s commitment to policy transparency and the implementation of the Electronic Foreign Exchange Matching System (EFEMS) for foreign exchange transactions. He pointed out that these measures have contributed to reducing arbitrage and speculation in the market, gradually rebuilding trust among market participants.
“Trust is the currency of central banking. If the public loses trust in the institution, the efficacy of its policies diminishes,” Cardoso concluded, reaffirming the importance of credibility in central banking and the commitment to fostering a stable economic environment in Nigeria.
