Nigeria’s central bank, led by Governor Olayemi Cardoso, is determined to combat inflation and enhance the undervalued naira currency, aiming for a significant drop in inflation to around 21%. Cardoso, who took office in September, is under scrutiny to potentially increase interest rates at the upcoming Central Bank of Nigeria (CBN) meeting, responding to December’s alarming inflation rate of 28.92%, the highest in over 27 years.

In a recent address, Cardoso highlighted the CBN’s inflation-targeting policy, projecting a decline in inflationary pressures to 21.4% in 2024. He emphasized the positive impact of enhanced agricultural output and the alleviation of global supply chain challenges on consumer confidence and purchasing power.

Under Cardoso’s leadership, Nigeria’s central bank is transitioning towards a more conventional monetary policy approach, departing from the unconventional strategies of his predecessor. The adoption of an inflation-targeting framework in November reflects this shift.

President Bola Tinubu’s reforms, such as removing a petrol subsidy and easing currency trading restrictions, have set the stage for change. Despite these efforts, challenges persist, including a forex shortage and a significant gap between official and parallel market exchange rates.

Cardoso expressed confidence in the current undervaluation of the naira, outlining a coordinated strategy with fiscal measures to facilitate genuine price discovery. The aim is to establish a more balanced and stable exchange rate. To address the forex market’s liquidity, the CBN, under Cardoso’s leadership, is committed to clearing outstanding FX obligations, having already paid at least $2 billion of the estimated $7 billion owed. This coordinated approach seeks to bring about a positive transformation in the near term.

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