The governor of the Central Bank of Nigeria, Olayemi Cardoso, has affirmed that all verified foreign exchange (FX) backlogs have been settled, with security agencies investigating suspicious transactions for prosecution.
Cardoso made this assertion on Tuesday following the Monetary Policy Committee (MPC) decision to raise the benchmark interest rate by 200 basis points to 24.75 percent. The committee also adjusted the asymmetric corridor around the Monetary Policy Rate (MPR) and other key monetary policy parameters.
Despite the rate hike, Cardoso emphasized that the apex bank had cleared all valid and verified FX backlogs, with only about $2.4 billion remaining invalid for payment. Security agencies are scrutinizing dubious FX claims to hold perpetrators accountable.
The MPC’s decision, marking the second consecutive rate hike under Cardoso’s leadership, surprised many analysts who had anticipated a hold on rates. However, Cardoso justified the tightening cycle as necessary to bring inflation under control and restore purchasing power.
The meeting focused on addressing inflationary pressures and ensuring exchange rate stability, with members opting to progress with the tightening cycle after reviewing the balance of risks and the near-term inflation outlook.
The committee identified food price inflation driven by supply shortages and high logistics costs as a significant contributor to headline inflation. To address this, it called for the full implementation of government agricultural policies and broader fiscal consolidation, including improvements in tax collection.
The MPC also commended efforts to stabilize the foreign exchange market and enhance investor confidence through policy reforms. It urged the central bank to sustain surveillance of the banking system and expedite bank recapitalization to mitigate potential risks.
Looking ahead, Cardoso assured that the current contractionary policy stance may not be prolonged, with the CBN expecting inflation moderation from May. He emphasized the central bank’s commitment to openness and transparency in FX transactions, emphasizing that market access should not be restricted.
Meanwhile, Prof. Uche Uwaleke, a former Commissioner for Finance in Imo State, advised the MPC to adopt an incremental approach to MPR tightening, considering both inflation and growth concerns. He cautioned against excessive reliance on interest rate hikes and urged a balanced policy response to address stagflation challenges in the economy.