CBN signals pause in interest rate hikes

Estimated reading time: 3 minutes

The Central Bank of Nigeria (CBN) Governor, Olayemi Cardoso, has hinted at a possible slowdown in the bank’s aggressive interest rate hikes. In a statement delivered through his deputy, Phillip Ikeazor, Cardoso acknowledged the need to maintain high rates for now but suggested a shift in the near future.

Cardoso said that on Saturday in Lagos at the launch of a book titled ‘The Power of One Man: How the Soludo-Engineered Consolidation Transformed Nigerian Banks to Global Players’, authored by Ray Echebiri.

“It is important that we tighten and hold on for a little while,” Ikeazor said on behalf of Cardoso. “In no distant future, we will be able to slow down on the rate hikes.

“Once you do not tame and control inflation and you get into hyperinflation, it takes you several years to get out of it. There is still a South American country that still has significant oil reserves but they are in hyperinflation and I think everyone is aware of what is happening in that economy. We have another country in East Africa which is also in hyperinflation. We know how hard they are struggling to get out of that.

• If your woman is so obsessed with these 3 things, it’s time to leave her
• BREAKING: Senate confirms Yemi Cardoso as CBN Governor, four others as deputies
• Cardoso assumes office as Acting CBN Governor
• CBN Gov Cardoso paints mixed picture: Economy improves, cost of living remains high
• Nigerian History Series – General Murtala Muhammed

“For us as a central bank, we are focusing on our core mandate of price stability, maintaining a stable exchange rate, and, of course, economic growth. But it is a question of sequencing. It is very important that we do not enter hyperinflation. Once you enter hyperinflation, the transmission of monetary economic tools will become completely ineffective. It is important that we avoid that.”

This statement comes after a series of significant interest rate increases by the CBN in recent months. The goal has been to curb Nigeria’s stubbornly high inflation, which currently sits at over 33%.

Effectiveness of Rate Hikes Debated:

While interest rate hikes are a traditional tool for combating inflation, their effectiveness in Nigeria’s current situation is a subject of debate. Some analysts argue that the high rates are necessary to curb inflation and stabilize the economy. Others express concern that further hikes could stifle economic growth and job creation.

Challenges Remain:

Even if the CBN slows down on rate hikes, the battle against inflation is far from over. External factors, such as global supply chain disruptions and the ongoing war in Ukraine, continue to put upward pressure on prices. Additionally, addressing structural issues within the Nigerian economy, like fuel subsidies and exchange rate management, will be crucial for long-term inflation control.

Looking Ahead:

The CBN’s signal of a potential pause in rate hikes offers a glimmer of hope for businesses and consumers struggling with the high borrowing costs. However, much will depend on Nigeria’s economic performance in the coming months. The CBN will need to carefully monitor inflation data and adjust its policies accordingly to achieve a balance between price stability and economic growth.

Tags: CBN, Olayemi Cardoso, Interest, Lagos, Nigeria, Central Bank of Nigeria, Phillip Ikeazor, Banks, Charles Soludo, Ukraine, Economy