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Nigeria Central Bank Boss Sees Interest-Rate Cuts on the Horizon

Olayemi Cardoso, governor of the Central Bank of Nigeria. (Betty Laura Zapata/Photographer: Betty Laura Zapata)

(Bloomberg) -- Nigerian Central Bank Governor Olayemi Cardoso said the country’s tight monetary policy stance is helping to corral inflation and could soon open the door for interest rate cuts.  

“To the extent that the right policies are used, and obviously with the results we’ve seen the right policies are being used, I believe that in the not-to-distant future, things will begin to moderate and interest rates will come down,” he said Thursday at an event in Lagos, the commercial capital. 

“Between February and May of this year the month-on-month rate of inflation has halved,” he said.

Nigeria is battling inflation that’s near a three-decade high following economic reforms last year that partially lifted popular fuel subsidies and eased foreign exchange controls, triggering a steep fall in the naira.

That’s drawn a robust response from Cardoso since the former Citigroup Inc. executive took office in September.

The central bank has increased interest rates by 750 basis points to 26.25% and cleared a foreign-exchange backlog after stepping back from defending the naira’s value against the dollar. 

That’s helped stabilize the unit, though it’s still the world’s worst performing currency this year after the Lebanese pound. 

“If these hikes were not done at the time they were done, if you recall, naira to dollar was almost tipping over. This helped to stabilize things,” Cardoso said.

The next rate decision will be announced on July 23 following a meeting of the central bank’s monetary policy committee.

“Fiscal issues being moderated and the ability to soak up all the excess liquidity that we have in the system — and be able to balance things out over a period of time — that’s the important thing for the MPC,” he said.

 

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