Nigeria’s apex bank to commence new policy on inflation, orders banks recapitalisation
The Central Bank of Nigeria (CBN) will tighten its policy over the next two quarters to manage inflation, while directing banks to boost capital to support an expansion of the economy.
The Centra its new governor, Olayemi Cardoso, revealed this on Friday, while outlining his policy thrust. He told bankers that Nigeria could grow in size 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 Friday, 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.
Africa’s largest economy could grow by 3.9% in the fourth quarter, Cardoso said.
Cardoso pledged to focus on rebuilding trust at the regulator, manage liquidity to curb inflation, bring down high interest rates and stabilise the exchange rate.
“The Central Bank of Nigeria (CBN) is fully committed to ensuring price stability and financial system stability,” Cardoso told bankers in the commercial hub of Lagos.
He added that the CBN is “taking measured and deliberate steps to send the right signals to markets.”
President Bola Tinubu has embarked on Nigeria’s boldest reforms in decades by scrapping a costly but popular subsidy on petrol and a system of multiple exchange rates which had kept the currency artificially strong, curbed trade and growth.
Cardoso said reforms, which have worsened hardship for the population, will contribute to a stable exchange rate and improve macroeconomic stability.
The CBN had in the past raised rates by over 700 basis points since last year to fight inflation. Cardoso said month-on-month inflation had started to fall and that his team has worked on measures to ensure rates feed through to the economy.
The central bank has settled overdue currency forwards for 31 banks, Cardoso said, in a bid to relieve pressure on the naira, which has been in freefall on the parallel market.
The governor said he will allow market forces to determine exchange rates and play a more limited advisory role in support of the government’s economic growth agenda than under his predecessor.
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