CBN Governor Cardoso Predicts Inflation Moderation and Undervalued Naira Recovery

Central Bank of Nigeria Governor Olayemi Cardoso said inflation will moderate this year and described the country’s naira currency as “undervalued,” in his first public comments on the economy since November.

“Inflationary pressures are expected to decline in 2024 due to the CBN’s inflation-targeting policy, which aims to rein in inflation to 21.4%,” Cardoso told an event Wednesday hosted by the Nigerian Economic Summit Group.

“The outlook for decreasing inflation in 2024 will have a profound impact on businesses, providing a more predictable cost environment and potentially leading to lower policy rates, stimulating investment, fueling growth and creating job opportunities,” he said via video link.

Cardoso set high expectations with a speech in November when he promised sweeping reforms, including a switch to inflation targeting from trying to control money supply. But he’s been largely silent in public until Wednesday’s speech — drawing criticism for a lack of communication.

The central bank is expected to raise interest rates sharply when it meets next month. The gathering, which was only scheduled last week, will mark the first time the monetary policy committee has convened since July, when it raised rates to 18.75%.

Inflation since then has accelerated and stood close to a three-decade high of 28.9% in December.

Africa’s most populous nation is battling a cost-of-living crisis fanned by reforms last year aimed at boosting growth. The measures, led by relaxation of the country’s managed exchange rate and the abolition of fuel subsidies, were heralded by international investors but have caused hardship at home and led to steep falls in the currency.

“We believe that the naira is currently undervalued,” Cardoso said. “And coupled with coordinated measures on the fiscal side, we will expedite genuine price discovery in the near term.”