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In a recent announcement, Olayemi Cardoso, the governor of Nigeria’s Central Bank (CBN), revealed his expectation for headline inflation to decrease to 21.4% in 2024. Despite promising a decline in inflation, the details of the CBN’s strategy remain elusive.
Cardoso, addressing an event on Wednesday, attributed the projected moderation in inflation to the CBN’s inflation-targeting policy. He emphasized the potential positive impact on businesses, envisioning a more predictable cost environment and lower policy rates, which, according to him, would stimulate investment, foster growth, and create job opportunities.
The CBN is scheduled to convene its first rate-setting meeting since July 2023 on February 26-27, 2024. This meeting comes against the backdrop of 2023’s soaring headline inflation, reaching a 27-year high of 28.9%, primarily driven by food inflation.
Analysts and investors express concern over the CBN’s governor, who, since assuming office in September, has not called a rate-setting meeting in four months. Ongoing silence and a perceived lack of urgency raise apprehensions, particularly as the naira faces challenges, trading at some of its lowest levels amid a dollar shortage.
Under the previous acting CBN governor, Folashodun Shonubi, interest rates were raised twice. However, the current governor’s approach differs, as highlighted in his first policy speech last November, where he mentioned the ineffectiveness of rate meetings due to monetary transmission mechanisms.
According to the Nigerian Economic Summit Group (NESG), the country is expected to experience moderate inflationary pressures in 2024. The NESG’s 2024 macroeconomic outlook projects an average inflation rate of 21.5%, a slight improvement from the estimated average of 24.5% in the previous year. Factors contributing to this slowdown include lower deficit monetization, relative exchange rate stability, and heightened monetary measures by the Central Bank, as outlined in the report.
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