N27trn Ways and Means, N10.5trn interventions triggered MPR hike decision, says Cardoso
The Governor, Central Bank of Nigeria (CBN), Yemi Cardoso, has said that the country is currently suffering from the impact of the excesses of N27 trillion ways and means as well as N10 trillion in intervention programmes which led to the recent inflation.
Cardoso, who made this statement in Lagos at a Chief Executive Officers (CEO) Forum on Thursday, said that high interest rates are driven by increased money supply and leads to inflation, which forces the Monetary Policy Committee (MPC) to maintain elevated rates.
Cardoso also explained that the MPC’s primary mandate is to reduce inflation, and its decisions are based on data trends rather than emotions, adding that “Interest rate is not set by the governor of the Central Bank. The interest rate is set by the members of the monetary policy committee.
According to him “Thankfully, we have a monetary policy committee composed of independent-minded people who are solely driven by data.
“The MPC has made it very clear that for them the major issue is taming inflation and has also made it very clear that they will do whatever is necessary to tame inflation.”
He said in a situation where a lot of money went into the financial system and we have ways and means that increased to N27 trillion and interventions of N10.5 trillion, it has its own consequences and that is what we are reaping now.
He however said that high interest rate is temporary, adding that once inflation rate moderates, the rate will decline.
Speaking further, he said “the MPC is not oblivious to the fact that ultimately, we do want growth. If these hikes were not done at the time they were done, the naira to the dollar was almost tipping over. This helps to stabilize the local currency. Secondly, it is a timing issue. It’s not something that will remain with us forever.
“Fiscal issues being moderated and the ability to suck up all the excess liquidity in the system and be able to balance things out over a period of time. That’s the important thing for the MPC as far as I can see.
“Between February and May of this year, the month-on-month rate of inflation has gone down 50%. I sense that this is not something that is a one-size-fits-all. I think in a not too distant future, the interest rate will come down,” he added.
