CBN Governor Cardoso Explains Naira Floatation Decision
Central Bank of Nigeria (CBN) Governor, Olayemi Cardoso, has opened up about his decision to float the Naira in the foreign exchange market, citing the need to bring the official exchange rate closer to market reality. This move was necessary to address the disparity between the official and parallel rates, which had encouraged arbitrage and speculation, ultimately eroding trust in the market ¹.
Cardoso, who has been in office for a year, acknowledged that previous CBN governors had considered but ultimately abandoned the floatation option due to fears of massive depreciation and contagion effects. However, he emphasized that credibility is earned through consistency and that the decision to float the Naira sent a strong message to market participants about the CBN’s commitment to transparency and sound monetary policy.
Key Takeaways from Cardoso’s Speech:
- Restoring Credibility: Cardoso stressed that credibility is essential for the success of any policy, and that the CBN’s actions have been guided by this principle.
- Containing Inflation: Despite acknowledging that the CBN has yet to meet its inflation target, Cardoso noted that recent declines in July and August 2024 indicate progress.
- Monetary Policy Rate (MPR): The CBN’s decision to raise the MPR to 27.25% was a bold move aimed at curbing excess money in circulation and controlling inflation.
Cardoso’s speech, titled “Leadership in Challenging Times: Restoring Credibility, Building Trust, and Containing Inflation,” was delivered to the Harvard Club of Nigeria in Lagos. As the CBN governor approaches the end of his first year in office, his policies have been shaped by his experience in banking, stockbroking, and consulting, as well as his tenure as Commissioner for Economic Planning and Budget of the Lagos State Government
