The Governor of the Central Bank of Nigeria (CBN), Olayemi Cardoso, has once again attributed the country’s current economic challenges to the monetary policies implemented by his predecessor, Godwin Emefiele.
Cardoso made this statement during a press briefing on Tuesday 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, raising it 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, until June 9, 2023. Following Emefiele’s suspension, President Bola Tinubu appointed Cardoso as CBN chief in September 2023, a move that was swiftly confirmed by the Senate.
In the past year, the MPC under Cardoso has raised the interest rate by 8.5%, increasing it from 18.75% in September 2023 to 27.25% a year later. During Cardoso’s tenure, the naira’s value has also significantly declined, trading at over ₦1,600/$1, compared to around ₦700/$1 in September 2020.
When asked whether the apex bank’s monetary policies, including multiple interest rate hikes and the collapse of foreign exchange windows, are effectively addressing the economic hardships faced by Nigerians, the CBN governor reiterated that the current monetary situation is a result of his predecessor’s policies.
“You can’t divorce the situation that has taken place with what happened in the last one year,” Cardoso said while the economy on average was growing at 1.2% during Emefiele’s tenure, the money supply was growing at 12.6%. “This was an inherent distortion,” he said.
“We came into a very loose money supply situation between 2017 and 2023 and witnessed the pumping of liquidity into the system.
“In 2015, the money supply was about N19tn, and in 2023, it was N54tn. That’s a huge increase, a very huge increase. And then a substantial amount of that was through ways and means.
“So, essentially, the printing of money resulted in a huge amount of money chasing the same amount of goods or a relative amount of goods. I think that context is very important to have.”
Known as the Ways and Means, the apex bank offered short-term financing to the Federal Government to cover its budget shortfalls.
“Let’s not forget that we had a situation where global oil prices collapsed in 2015. With that collapse, unfortunately, and it is a fact of life, Nigeria is a monolithic economy.
“So, you are dependent for everything on oil, and as a result of the collapse of oil prices, the foreign exchange began to dwindle and it is important to understand that within this period, the response to that was lesser foreign exchange and fixing of foreign exchange prices and that also harmed the economy to no end,” he added.
Cardoso also said “attempt to harmonise the multiple exchange rates has brought about results” and Nigerians “no longer have multiple windows”.
He said the exchange rate is now more flexible and people can “transact their businesses through willing buyer, willing seller, as opposed to a situation where multiple exchange rates discourage and not allow that to happen”.
“I accept the fact that many outside are finding things very difficult but I want to say that the things we are doing are set to put the economy of this country in a trajectory where we shouldn’t go back and see some of the inefficiencies we’ve seen in our system over the recent past. These, I believe are short-term pains and I believe we will get out of the situation we are in now.
“Tough though they may, and I accept that they may be tough but we have no choice but to deploy these tools to reign in the excess liquidity in the system, the high inflation and encourage portfolio investors who had taken flight to come back and take interest in Nigeria,” he added.