Nigeria’s new central bank governor, Olayemi Cardoso, has unveiled his ambitious plans to tame the country’s soaring inflation and boost the value of its currency, the naira.
Cardoso, who took office in September, faces the daunting task of reviving Africa’s largest economy, which has been battered by the global oil price slump, the COVID-19 pandemic, and rising insecurity.
In a speech on Wednesday, Cardoso said he aims to bring inflation down to 21.4% by the end of 2024, from the current level of 28.92%, which is the highest in more than 27 years.
He said he will achieve this by adopting an inflation-targeting framework, which will guide the central bank’s monetary policy decisions and anchor the public’s inflation expectations.
He also said he expects inflationary pressures to ease in 2024, as agricultural output improves and global supply chain disruptions subside.
Naira Undervalued
Cardoso also addressed the issue of the naira, which has been under pressure for years due to a chronic shortage of foreign exchange and a wide gap between the official and parallel market rates.
He said he believes the naira is currently undervalued and vowed to work with the fiscal authorities to expedite genuine price discovery in the near term.
“This coordinated approach will contribute to a more balanced and stable exchange rate,” he said.
He also reiterated his pledge to clear the backlog of outstanding foreign exchange obligations, which he estimated at $7 billion, after paying at least $2 billion in November.
Conventional Policy Approach
Cardoso’s policy stance marks a departure from the unorthodox approach of his predecessor, Godwin Emefiele, who pursued multiple exchange rates, capital controls, and direct lending to sectors deemed strategic.
Analysts have welcomed Cardoso’s more conventional policy approach, saying it will enhance the credibility and transparency of the central bank and attract more foreign investment.
However, they also cautioned that Cardoso will face many challenges and trade-offs in implementing his policy agenda, especially in the face of external shocks, political interference, and security threats.
Hope for a Sustainable Recovery
Despite the difficulties, Cardoso expressed optimism that Nigeria can achieve a sustainable and inclusive economic recovery, with the support of the central bank and other stakeholders.
He said the central bank will continue to provide stimulus and liquidity to the economy, while also ensuring financial stability and sound supervision.
Cardoso also said the central bank will support the government’s efforts to diversify the economy, improve infrastructure, and create jobs.
He urged Nigerians to be patient and support the central bank’s policies. He said the policies aimed to improve the welfare and living standards of the people.
Source: Reuters
