THE Governor of the Central Bank of Nigeria (CBN), Olayemi Cardoso, has once again held the monetary policies of his predecessor, Godwin Emefiele, responsible for the country’s current economic challenges.
Cardoso made this statement during a press briefing yesterday following the 297th meeting of the Monetary Policy Committee (MPC) in Abuja.
He announced the committee’s decision to increase the Monetary Policy Rate (MPR) by 50 basis points, from 26.75% to 27.25%, in an effort to combat inflation, which currently stands at 32.15%.
Emefiele served as CBN governor from June 4, 2014, to June 9, 2023.
After Emefiele’s suspension, President Bola Tinubu appointed Cardoso as CBN governor in September 2023, a decision that was promptly confirmed by the Senate.
Under Cardoso’s leadership, the MPC has raised interest rates by 8.5% over the past year, increasing from 18.75% in September 2023 to 27.25% a year later. The naira has also seen significant depreciation, trading at over ₦1,600/$1, compared to around ₦700/$1 in September 2020.
When questioned about whether the apex bank’s monetary policies, including multiple interest rate hikes and the collapse of foreign exchange windows, have had a positive effect given the economic hardships faced by Nigerians, Cardoso reiterated his predecessor’s influence on the current monetary climate.
“You can’t separate the current situation from what transpired in the last year,” Cardoso stated, noting that during Emefiele’s term, the economy grew by an average of 1.2% while the money supply increased by 12.6%, calling it an “inherent distortion.”
He explained, “From 2017 to 2023, we encountered a very loose money supply environment, with significant liquidity pumped into the system. In 2015, the money supply was approximately ₦19 trillion, and by 2023, it had escalated to ₦54 trillion, a considerable surge, much of it facilitated through ways and means.”
Cardoso elaborated that the excessive printing of money led to an abundance of cash competing for a limited supply of goods, which is essential to understand in this context.
Referring to the “Ways and Means,” he mentioned that the apex bank provided short-term financing to the Federal Government to address budget deficits.
“We must remember that in 2015, global oil prices plummeted, leading to Nigeria’s overreliance on oil income and a subsequent decline in foreign exchange availability. This decline prompted a response of reduced foreign exchange and the fixing of exchange rates, which significantly harmed the economy,” he said.
Cardoso noted that efforts to unify multiple exchange rates have yielded positive results, leading to the elimination of several windows for currency exchange. He highlighted that the current exchange rate is now more flexible, allowing transactions to be conducted based on a willing buyer, willing seller principle, rather than through a system of multiple rates that discouraged trade.
“I recognize the challenges many are facing, but I assert that our actions are aimed at positioning the economy on a path to avoid repeating the inefficiencies seen in the past. Although these measures may cause short-term discomfort, I believe it is a necessary sacrifice to address excess liquidity, high inflation, and to entice portfolio investors back to Nigeria,” he concluded.
