Nigeria’s central bank will tighten policy over the next two quarters to manage inflation while directing banks to boost capital to support an expansion of the economy. This is in guise to curb excess liquidity in the banking system and tackle inflation, which has risen for 10 consecutive months, reaching 27.33% in October , the highest in about 18 years, reports experts.
The Central bank is poised to redefine its price stability mandate as 2023 ends with soaring inflation, weak currency and cash crunch. The Central Bank of Nigeria (CBN) would stop direct fiscal interventions that have blurred the lines between monetary and fiscal policy and undermined its ability to manage inflation, discontinuing the much-criticized unorthodox policies which reigned during the year 2023. To curb this, the CBN board has approved the adoption of an explicit inflation-targeting framework to enhance the effectiveness of our monetary policy.
“The Central Bank of Nigeria is fully committed to ensuring price stability and financial system stability. We will tackle institutional deficiencies, restore corporate governance, strengthen regulations and implement prudent policies.”
Olayemi Cardoso, Governor of the Central Bank – Nigeria
According to Cardoso, CBN’s governor, the west African nation’s economy could grow to $1 trillion over the next seven years and that lenders required extra capital to play in a bigger economy.Nigeria’s $240 billion economy recorded third-quarter growth of 2.5% on december 2023 barely changed from the previous quarter, as its loss-making dominant oil sector contracted at a much slower pace while government reforms were yet to take effect.
« We are taking measured and deliberate steps to send the right signals to markets, the economy will experience significant stability in the short to medium term as we recalibrate our policy toolkit and implement far-reaching measures. »
Olayemi Cardoso, Governor of the Central Bank – Nigeria
Government authorities pledge to allow market forces to determine exchange rates as the CBN aims to set clear, transparent and harmonized rules governing market operations. New foreign exchange guidelines will be developed and extensive consultations will be done with banks and economic operators before implementing any new requirements.