CBN Reacts After Dangote Tackles Apex Bank Over High Interest Rate

• The Central Bank of Nigeria has stated that the bank will soon be able to slow down the benchmark interest rate's rate of growth
• According to the bank, sustaining elevated interest rates is crucial in mitigating the likelihood of hyperinflation and its aftermath
• The regulator stated that the rate increases will remain in place for as long as the bank is able to rein in and slow down the rate of inflation

Legit.ng journalist Zainab Iwayemi has over 3-year-experience covering the Economy, Technology, and Capital Market.

Dr. Olayemi Cardoso, the governor of the Central Bank of Nigeria, has said that the bank will soon be able to reduce the growth rate in the benchmark interest rate.

Cardoso made this statement on Saturday in Lagos during the book launch of Ray Echebiri's book, "The Power of One Man: How the Soludo-Engineered Consolidation Transformed Nigerian Banks to Global Players."

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Rate hike is neccessary

Maintaining higher interest rates is critical to reducing the risk of hyperinflation and its aftereffects, according to the CBN governor, who was represented by Phillip Ikeazor, the deputy governor of financial stability.

He said,

“Once you do not tame and control inflation and you get into hyperinflation, it takes you several years to get out of it. There is still a South American country that still has significant oil reserves, but they are in hyperinflation, and I think everyone is aware of what is happening in that economy. We have another country in East Africa which is also in hyperinflation. We know how hard they are struggling to get out of that.

“For us as a central bank, we are focusing on our core mandate of price stability, maintaining a stable exchange rate, and, of course, economic growth. But it is a question of sequencing. It is very important that we do not enter hyperinflation. Once you enter hyperinflation, the transmission of monetary economic tools will become completely ineffective. It is important that we avoid that.”

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On how long the rate hikes will be maintained, The Punch reported that the regulator said that it will be as long the bank can control and can reverse galloping inflation.

He said,

“Once we can do that, then we maintain. We are all aware that in the Western world, we did have rate hikes to be able to control theirs and they maintained it for a very long time. It is only now that they have stopped rate hikes but they have not even started dropping the rates as we speak.

“It is important that we tighten and hold on for a little while and in no distant future, we will be able to slow down on the rate hikes.”

Cardoso had declared in May that interest rate increases would continue until the inflation problem was resolved.

Cardoso stated in a Financial Times article that all signs pointed to the MPC taking all necessary steps to control inflation.

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He said,

“They will continue to do what has to be done to ensure that inflation comes down. Let’s face it: for a long period of time, the CBN did not embrace orthodox monetary policies. We want to go back to using an orthodox method, and it will take us to where we want to go.”

According to the National Bureau of Statistics, in May 2024, the headline inflation rate increased to 33.95 per cent relative to 33.69 per cent in April.

Dangote tackles CBN over new interest rate

Legit.ng reported that Aliko Dangote, the chairman and CEO of the Dangote Group, has criticised the Central Bank of Nigeria (CBN) for its most recent interest rate increase, which brought it to nearly 30%.

Dangote said businesses could not keep up with the present rate while addressing the audience on Tuesday at the banquet hall of the State House in Abuja, during the opening session of a three-day summit organised by the Manufacturers Association of Nigeria (MAN)

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Recall that the Monetary Policy Committee (MPC) of the CBN decided to raise the MPR from 24.75% to 26.25% in May, marking the third consecutive hike, after a two-day meeting.

Source: Legit.ng