Olayemi Cardoso, the newly appointed governor of Nigeria’s central bank, announced plans to implement tighter monetary policies in the next two quarters to manage inflation while urging banks to bolster their capital to support economic growth.
Addressing immediate challenges such as curbing excess liquidity and combating inflation, Cardoso emphasised a shift from direct fiscal interventions that had blurred the lines between monetary and fiscal policies under the previous leadership of Godwin Emefiele.
“We’re adopting an explicit inflation-targeting framework to enhance our monetary policy effectiveness,” Cardoso stated in Lagos, outlining a move away from criticised, unorthodox policies. Details for this framework, in collaboration with fiscal authorities, are in the final stages of preparation.
Cardoso also highlighted the potential for Nigeria’s economy to reach $1 trillion within seven years, emphasising the need for increased capital in banks to facilitate participation in an expanding economy.
Despite Nigeria’s $240 billion economy recording a marginal 2.5% growth in the third quarter, mainly attributed to slower contraction in the oil sector and pending government reforms, Cardoso expressed optimism, projecting a potential 3.9% growth in the fourth quarter.
Asserting the commitment to ensure price and financial system stability, Cardoso pledged to address institutional deficiencies, enhance regulations, and implement prudent policies. He assured stakeholders of significant short- to medium-term stability amid recalibrated policy approaches and impactful measures.
Acknowledging President Bola Tinubu’s bold reforms, including subsidy removal on petrol and exchange rate adjustments, Cardoso highlighted the anticipated positive impact on exchange rate stability and macroeconomic conditions, despite potential challenges for the population.
Cardoso also emphasised the central bank’s efforts to settle overdue currency forwards to ease pressure on the naira, facilitate payments to banks and alleviate strain on the currency, which has experienced volatility in unofficial markets.
Stressing the intention to allow market forces to govern exchange rates, Cardoso emphasised the development of new foreign exchange guidelines, engaging in extensive consultations with banks and FX operators before implementing any new requirements.