New CBN governor faces an uphill task in tackling inflation

The Nigerian Senate has confirmed the nomination of Yemi Cardoso as the 11th governor of the country’s central bank. The new CBN governor is tasked with tackling record inflation and saving a battered currency.

The Nigerian Senate on Tuesday confirmed Yemi Cardoso as the next governor of Nigeria’s Central Bank after an hours-long screening process. The accomplished banker succeeds Godwin Emefiele whose controversial policies called into question the CBN’s independence. Also confirmed were four deputy governors: Emem Nnana Usoro, Muhammad Sani Abdullahi Dattijo, Philip Ikeazor, and Bala M. Bello. While Cardoso’s political affiliations may be called into question, he is now tasked with tackling record inflation and saving a battered currency.

Controlling inflation in a cash-strapped economy will be a major test for the new CBN governor. Since Emefiele’s reign, the Central Bank has struggled with controlling inflation which hit an 18-year high of 25.80% in August, driven by food prices. Cardoso is betting that evidence-based policies will make a difference. “We will revamp the infrastructure in the central bank with respect to data and to ensure that the data gathering capacity is significantly enhanced,” he told senators during the screening.

Last week, the central bank postponed the Monetary Policy Committee (MPC) meeting to decide the nation’s interest rates—for the first time in eight years. Experts have predicted that the CBN will elect to raise interest rates from 18.75% to 20% in response to mounting inflation. Two months ago, the apex bank hiked interest rates by 25 basis points.

Despite currency reforms by President Bola Tinubu notably the unification of the foreign exchange market, the naira fell to N1000 to a dollar on the parallel market on Tuesday. With a significant arbitrage in the FX market, the CBN governor already has work on his hands. The apex bank had failed to fulfill an earlier promise to clear the current FX backlog—estimated at $10 billion—in two weeks. The big question on the lips of many observers is how the new CBN governor hopes to tackle this.

“We are aware there are unsettled obligations. Our immediate priority will be to verify the authenticity of the figure. And then of course, once we do that, we need to frankly find a way to take care of it,” Cardoso said in response to questions on how the new CBN leadership will address the FX backlog. He, however, didn’t provide additional details on the measures to be taken.

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