The Governor of the Central Bank of Nigeria (CBN), Yemi Cardoso, has warned that persistent inflation could lead to extended monetary tightening measures, potentially hindering the nation’s growth potential. In the foreword of the CBN’s inaugural Macroeconomic Outlook for Nigeria, Cardoso suggested that the central bank might continue its hawkish monetary policy, characterized by higher interest rates, if inflation continues to rise.
This statement comes shortly after the National Bureau of Statistics (NBS) released the Consumer Price Index (CPI) report for June, which showed a month-on-month increase in inflation for the first time since February 2024. With inflation ticking higher, the CBN may need to take decisive action to curb rising prices and maintain economic stability.
Risks to Nigeria’s positive domestic outlook
Cardoso further highlighted several risks to Nigeria’s positive domestic outlook. He noted that security challenges, supply-side shocks, and global geoeconomic fragmentation might exacerbate inflationary pressures.
These factors, coupled with long-standing structural imbalances, could necessitate extended monetary tightening, thereby depressing growth potential.
He said: “The positive domestic outlook is, however, subject to certain risks, especially, as security challenges, supply-side shocks, and global geoeconomic fragmentation could aggravate inflationary pressures.
“Elevated inflation, due to long-standing structural imbalances, could extend monetary tightening and depress growth potentials.
“Oil theft, pipeline vandalism, and an unlikely decline in crude oil price could also constrain fiscal space, hamper foreign exchange receipts, lower accretion to the external reserves, heighten pressure in the foreign exchange market and undermine domestic stability.”