Save for decisive tightening policy interventions of the Central Bank of Nigeria, using orthodox approaches, headline inflation could have reached 42.81 percent by December 2024 as against 34.80 percent, CBN governor Olayemi Cardoso disclosed.
The 42.81 percent headline inflation projected for last December was a counterfactual estimate which never happened due to the tightening cycle adopted by apex bank throughout six Monetary Policy Committee ( MPC) meetings in 2024.
Cardoso spoke yesterday in Abuja at the 2025 monetary policy forum themed: “managing the disinflation Process”. He said inflation erodes purchasing power, discourages investment, and exacerbates inequality. He was optimistic that disinflation was within reach in the year 2025 given that the economy had turned a corner.
Since he came on board as Head of the apex bank, Cardoso and his team inherited spiralled headline inflation. As a way out, the Monetary Policy Committee ( MPC)initiated a tightening cycle using orthodox approaches.
Throughout 2024 MPC sessions, apex bank implemented several bold policy measures across six MPC meetings. It raised the Monetary Policy Rate (MPR) by a cumulative 875 basis points to 27.50 percent, increased Cash Reserve Ratio (CRR) of Other
Depository Corporations (ODCs) by 1750 basis points to 50.00 percent, and adjusted the asymmetric corridor around the MPR.
“The past year presented significant challenges, including persistent inflationary pressures exacerbated by global and domestic shocks. Despite these headwinds, our commitment to price and monetary stability has yielded measurable progress.
“We have seen relative stability in the foreign exchange market, a narrowing exchange rate disparities, and a rising external reserves of over US$40 billion as of December 2024”.
Speaking to challenges confronting the economy with headline inflation on fore front at 34.80 percent in December 2024 , he said food inflation had begun to show signs of moderation.
“Domestic structural challenges, exchange rate pass-through effects, and energy price adjustments continue to exert pressure on prices and economic activity. At the same time, we recognize that while structural factors play a significant role in Nigeria’s inflationary challenge, monetary dynamics have also contributed to price pressures.
“The liquidity injections associated with unorthodox monetary policies, particularly created a significant overhang.While these measures were intended to cushion immediate shocks, they did not translate into commensurate productivity growth, fueling inflationary pressures and heightened foreign exchange volatility.
“Excess naira liquidity in the system has amplified demand-driven inflation, further exacerbated by supply-side constraints stemming from structural deficits. These dynamics underscore the importance of a disciplined and coordinated approach to monetary policy to restore stability”, said Cardoso.
He said the bank will stick with orthodox monetary policy with a view to restoring confidence, strengthening policy credibility, and staying focused on its core mandate of price stability.
“Encouragingly, the results are becoming evident—FX liquidity is improving, fostering greater stability in the market. The naira is gradually aligning with market fundamentals, creating a more predictable environment for domestic production, exports, and essential imports. While challenges remain, we are confident that our policies are setting Nigeria on the path to sustainable economic stability.
“Today’s forum is an opportunity to generate actionable insights. Managing disinflation amidst persistent shocks requires not only robust policies but also coordination between fiscal and monetary authorities to anchor expectations and maintain investor confidence. Our focus must remain on price stability, the planned transition to an inflation-targeting framework, and strategies to restore purchasing power and ease economic hardship”, he said.
Cardoso underscores coordination between fiscal and monetary authorities to anchor expectations and maintain investor confidence.
In a good will message by Minister of Budget and Economic Planning , Senator Abubakar Atiku Bagudu, he lauded CBN under Cardoso watch for initiating reforms that reversed the economy to positive trajectories.
” This forum couldn’t have come at a better time. In the last 18 months, we have seen a close collaboration between fiscal and monetary sides. We have a president who is knowledgeable about the economy and he is clear on economic priorities . Nigeria has a strong capacity in agriculture and solid minerals “, he said.
The Chairman of Nigeria Governors’ Forum ( NGF) and Governor of Kwara state, AbdulRahman AbdulRazaq represented by Alhaji Lateef Shittu said the Nigeria economy has been grappling with inflationary pressure.
“Food inflation is most critical. We must remain steadfast in the pursuit of our goals “. He commended CBN for its bold steps in stabilizing the economy. He said states governors were committed in supporting policy measures that will be food security.