In a significant announcement, Governor Olayemi Cardoso of the Central Bank of Nigeria (CBN) has revealed a strategic plan to bring down the country’s inflation rate from 28.92% to 21.4% by 2024. Addressing the House of Representatives in Abuja, Cardoso attributed this anticipated decline to the federal government’s inflation-targeting policies.
Cardoso emphasized that the projected improvement in agricultural productivity and the alleviation of global supply chain pressures would play pivotal roles in curbing inflation. The CBN’s inflation-targeting framework, involving transparent communication and collaboration with fiscal authorities, is expected to lead to reduced policy rates, fostering investment, and creating job opportunities.
Acknowledging the current challenges in the foreign exchange market, Cardoso highlighted increased demand pressures, contributing to the continuous depreciation of the naira. Speculative forex demand, inadequate forex supply from non-remittance of crude oil earnings, heightened capital outflows, and excess liquidity from fiscal activities are identified as key factors.
To address these issues and create a stable macroeconomic environment, the CBN has shifted to a market-driven exchange rate. Despite short-term volatilities attributed to arbitrage and speculation, Cardoso outlined a comprehensive strategy. This includes unifying FX market segments, clearing outstanding FX obligations, introducing new operational mechanisms for Bureaux De Change (BDCs), enforcing the Net Open Position (NOP) limit, and adjusting the remunerable Standing Deposit Facility cap.
Governor Cardoso assured that the costs associated with these measures are temporary and will address fundamental issues affecting Nigeria’s macroeconomic landscape. The initiatives, aimed at establishing a more market-oriented mechanism for exchange rate determination, are expected to boost foreign exchange inflows, stabilize the exchange rate, and minimize its impact on domestic inflation. As the CBN charts this course, it marks a crucial step toward economic stability and resilience.