Cardoso defends rate hold, signals interest rates may stay high

By Onu Okorie

Central Bank of Nigeria Governor Olayemi Cardoso has defended the Monetary Policy Committee’s decision to leave interest rates unchanged at its most recent meeting, pushing back against widespread market expectations that the apex bank was about to begin cutting borrowing costs.

Speaking at a conference in Lagos on Thursday, Cardoso said the committee had weighed risks that were not fully priced in by the market, indicating that policymakers had picked up on emerging pressures that most observers had missed. He said future monetary policy decisions would continue to be guided strictly by economic data rather than investor sentiment, reiterating that price stability remained the central bank’s overriding priority.

The governor said interest rates could remain elevated for a while longer, even as Nigeria continues to record a sustained slowdown in inflation, pointing to ongoing geopolitical tensions and external economic shocks as the main reasons for the bank’s cautious approach.

Cardoso disclosed that the country had now recorded eleven consecutive months of disinflation, which he described as clear evidence that the central bank’s aggressive monetary tightening over the past two years was working. He said the trend had reinforced expectations that interest rates would eventually begin to moderate, though he stressed that the committee was in no rush to start an easing cycle given the persistent risks still facing price stability.

According to Cardoso, the conflict involving Iran and its broader geopolitical ripple effects had complicated the inflation outlook by introducing fresh external pressures. He said the bank had projected inflation would have fallen to much more moderate levels heading into next year had those developments not intervened.

The governor also credited Nigeria’s early adoption of economic reforms with strengthening the country’s ability to absorb external shocks that have destabilised many other emerging economies in recent months. “We had resilience and we were able to withstand the shocks,” he said, attributing that resilience directly to reforms undertaken well ahead of the recent wave of global disruptions.

Cardoso’s remarks reinforced the central bank’s broader commitment to a cautious, data-driven approach to monetary policy, signalling that any move to lower borrowing costs will hinge on sustained improvement in inflation figures and the wider economic environment rather than on market pressure for an earlier pivot.

Analysts said the governor’s comments suggest the Monetary Policy Committee will keep close watch on both global developments and domestic inflationary trends before shifting toward lower interest rates, even as the disinflation trend continues.