CBN ready with New Policy Measures to handle Inflation
CBN Governor, Olayemi Cardoso
CBN ready with New Policy Measures to handle Inflation
The fight to curtail battle inflation entered a new chapter with the Central Bank of Nigeria’s plan to adopt an inflation targeting framework to price management. The framework, which is also being implemented by central banks of several African countries, is expected to strengthen Nigerians’ purchasing power, and disposable income, drive aggregate demand and stimulate production, writes Festus Akanbi
The effects of rising inflation are felt by households and businesses across the nooks and crannies of the country.
That is why price stability is one of the core mandates of the Central Bank of Nigeria (CBN), which is working on adopting and implementing an inflation targeting framework for the economy.
The framework, expected to replace the exchange rate targeting framework, will be implemented with the backing of the people.
In its efforts to tame inflation, the CBN recently hosted the Monetary Policy Forum 2025, featuring fiscal authorities, legislative, private sector, development partners, subject-matter experts, and scholars with the theme: “Managing the Disinflation Process”.
The forum is a major push to improve monetary policy communication, foster dialogue, and collaborate on critical issues shaping monetary policy.
During the event, CBN Governor, Olayemi Cardoso explained that the apex bank’s focus is to sustain price stability, the planned transition to an inflation-targeting framework, and strategies to restore purchasing power and ease economic hardship.
He said the apex bank is continuing its disciplined approach to monetary policy, aimed at curbing inflation and stabilising the economy.
“These actions have yielded measurable progress: relative stability in the FX market, narrowing exchange rate disparities, and a rise in external reserves to over $40 billion as of December 2024.”
Cardoso reiterated that the goal of the CBN is to ensure that monetary policy remains forward-looking, adaptive, and resilient.
In addressing our economic challenges, collaboration is key: “Managing disinflation amidst persistent shocks requires not only robust policies but also coordination between fiscal and monetary authorities to anchor expectations and maintain investor confidence,” Cardoso said.
“Our focus must remain on price stability, the planned transition to an inflation-targeting framework, and strategies to restore purchasing power and ease economic hardship,” he added.
Last week, the CBN launched the Nigeria Foreign Exchange Code, marking a decisive step forward for integrity, fairness, transparency and efficiency in our FX market. Built on six core principles, it represents a binding commitment from the financial community to rebuild trust and inspire confidence.
CBN ready with New Policy Measures to handle Inflation
According to the CBN, financial inclusion also remains a priority. The Women Entrepreneurs Finance (We-FI) initiative under the National Financial Inclusion Strategy is bridging the gender gap, ensuring more women have access to financial services and digital tools.
Remittances through IMTOs rose 79.4 per cent to US$4.18 billion in the first three quarters of 2024, demonstrating the positive impact of FX reforms. Additionally, the CBN lifted the 2015 restriction barring 41 items from accessing FX at the official market to enhance trade and investment.
These reforms and developments reflect the bank’s commitment to creating an enabling environment for inclusive economic development. However, achieving macroeconomic stability requires sustained vigilance and a proactive monetary policy stance.
“As we shift from unorthodox to orthodox monetary policy, the CBN remains committed to restoring confidence, strengthening policy credibility, and staying focused on its core mandate of price stability,” Cardoso stated.
He said moving from the exchange rate targeting framework to the inflation targeting framework aligned with the apex bank’s determination to bring inflation upsurge under control in line with its price stability mandate.
Inflation uptick has remained a major concern to the CBN and is time to use monetary policy tools to control it.
Already, the data from the National Bureau of Statistics (NBS) showed that the Inflation Rate in Nigeria increased to 34.80 per cent in December from 34.60 per cent in November of 2024. The inflation rate in Nigeria is expected to be 32.00 per cent by the end of this quarter, according to Trading Economics global macro models and analysts’ expectations.
Market data showed that the various oil price shocks, the Covid-19 pandemic, and most recently, the war between Russia and Ukraine, have resulted in various shocks to the global economy, requiring changing responses to subdue the monetary and fiscal authorities in the advanced and emerging market economies.
To address these shocks, the CBN plans to migrate from an exchange rate targeting framework to a phased migration and now inflation targeting framework.
The CBN has been controlling the growth of the money supply to achieve price stability but is seeking a change of strategy to achieve better results.
Despite Inflation Spike, Economy Remains Attractive to Investors
A member of the CBN-led Monetary Policy Committee (MPC), Bala Bello, listed key indicators that have over time, kept domestic and domestic investors attracted to the domestic economy.
In his personal statement during the last MPC meeting held in Abuja, he said the external reserves position have grown remarkably to $40.88 billion as of November 21, 2024 from $40.06 billion at end-October 2024.
The upsurge in reserves levels, he said strengthens the needed buffer to mitigate unforeseen risks and reinforces the importance of ongoing efforts at sustaining improved foreign exchange supply.
Significant credit was extended to growth-enhancing sectors such as agriculture, manufacturing, and general commerce, as well as individuals and households,” he said.
According to the MPC member, this credit played a crucial role in stimulating economic activities and supporting output performance, emphasising the role of financial institutions in the economy.
He added that everyone has a role to play in this, and our collective vigilance is crucial for the stability of our financial system.
“This growth, driven by both the oil and non-oil sectors, with a notable contribution from the Services sector, is a testament to the resilience of our economy. The non-oil sector grew by 3.37 per cent in the third quarter, compared with 2.80 per cent in the second quarter, while the oil sector grew by 5.17 per cent (year-on-year), compared with 10.15 per cent in the preceding quarter. The positive growth 12 momentum, shown by leading indicators and staff forecasts, is expected to persist, providing a sense of stability and progress,” he said.
Another MPC member, Aloysius Ordu, said CBN staff presentations show noteworthy green shoots since the era of tight money began.
“First, there has been a marked improvement in the current account balance. Q3 2024 data shows a surplus of US$6.29 billion vis-à-vis US$5.14 billion in Q2 2024, and the overall balance of payment position recorded a surplus of US$3.79 billion,” he said.
“Second, the external reserves stood at US$40.88 billion at the end of October 2024, a remarkable 16.9 months of import cover. The exchange rate remained relatively stable for most of the second half of 2024, reflecting increased capital inflows on account of attractive yields,” he added.
On his part, another member of MPC, Bandele Amoo, said Nigeria’s Balance of Payments (BOP) position remained stable to support our external sector stability.
The BOP provisionally recorded a surplus in the third Quarter of 2024 driven by positive balances in the current account and net asset acquisition positions.
The overall account positively stood at US$3.79 billion as at Q3 of 2024. Meanwhile, portfolio inflows remain high, recording a net inflow of US$0.59 billion as of November 2024.
“The total foreign exchange flows through the economy stood at US$6,175 billion in September 2024 compared with $2,570.6 billion in August 2024. Furthermore, foreign reserves at the end of October 2024 stood at $39.68 billion, equivalent to several months of import cover”.
“External reserves are projected to further increase by year-end due to expected reduction in import demand pressures arising from the full deregulation of the downstream oil sector, reduced petroleum products importation regime, increased inflows, and other process management by the CBN,” he said.
Global Inflation Statistics
Earlier, Cardoso said the global inflation is projected to decline to 3.5 per cent in 2025, down from its peak of 9.4 per cent in 2022.
Speaking during the last Chartered Institute of Bankers of Nigeria (CIBN) Bankers Dinner in Lagos, he said major central banks are gradually easing their monetary conditions. This shift is slowly reopening access to international capital markets for emerging economies. However, global growth remains subdued at 2.6 per cent, hindered by geopolitical tensions, China’s economic slowdown, and growing trade fragmentation.
The committee was optimistic that fully deregulating the petroleum industry’s downstream subsector would eliminate scarcity and stabilise price levels in the short to medium term.
Thus, members of the MPC reiterated the need to strongly forge ahead with the deepening collaboration between the monetary and fiscal authorities to ensure the achievement of our synchronised objectives of price stability and sustainable growth.
