The Central Bank of Nigeria (CBN) Governor, Olayemi Cardoso, has stated that the country would witness stability in interest rates once the apex bank can control and reverse galloping inflation.
Galloping inflation refers to a rapid and accelerating increase in the general price level of goods and services in an economy. It is characterised by high and continuously rising inflation rates, often reaching hyperinflationary levels with severe economic consequences, including a loss of purchasing power, erosion of savings, and economic instability.
At the unveiling of a book titled: ‘The Power of One Man: How the Soludo-Engineered Consolidation Transformed Nigerian Banks to Global Players’, exactly 20 years after the revolutionary banking consolidation held in Lagos at the weekend, Cardoso said the CBN is committed to its core mandate of price stability, maintaining a stable exchange rate and economic growth.
Cardoso, who was represented by the bank’s Deputy Governor, Financial Systems Stability, Phillip Ikeazor, however, noted that the bank would exercise caution and operate in sequence in its efforts to maintain interest rate stability to avoid plunging the economy into hyperinflation.
Recall that the Cardoso-led Monetary Policy Committee had just increased the interest from 24.75 per cent to 26.25 per cent for the third consecutive time a few weeks ago within eight months of resumption in office.
He cited countries in South America with significant oil reserves but witnessing hyperinflation, stating that these countries are currently struggling to wriggle out of their macroeconomic woes.
He said: “We are aware that in the Western world, they did have rate hikes to be able to control theirs and they maintained it for a very long time. It is only now that they stop the rate hike and they have not even started dropping the rate as we speak.”
Cardoso stated that it is important to tighten and hold on for a while, in anticipation of a slowdown in interest rates in a not-distant future rather than plunging into hyperinflation.
He applauded the courage of the Governor of Anambra state, Prof. Charles Soludo for initiating and implementing the 2004/2005 banking consolidation that strengthened the nation’s banking industry and bolstered banks’ ability to finance the private sector and long-term projects in Nigeria.
According to him, Nigerian bank’s GDP currently weighs behind when compared with peers in other African countries, an indication that there is an urgent need for the banking sector’s capitalisation.
He said the exercise would strengthen the banks and make them more robust to meet expected headwinds.
Professor Charles Soludo said achieving a disruptive change and revolution in any system comes with a price to pay, noting that the current CBN team must remain resolute without any self-interest to achieve a successful banking recapitalisation.
He pointed out that the banking reform was successful due to the determination of the team to put aside self-interest and ethnic sentiments to make sacrifices for the country.
While recounting his ordeal in the process of initiating the 2004/ 2005 banking consolidation, Soludo said he received 19 written threats to stop him from carrying out the task during the period but he continued and completed the entire process.
According to him, this was because there was an urgent need to recapitalize the poorly capitalised banks and make them stronger to finance the private sector and support economic growth.
“It was something short of a revolution, we went through hell. It was war and a lot of things were thrown into the basket in the course of the war. I received a total of 19 written threats, my children have been in exile because of banking consolidation.
“In leadership, there must be self-sacrifice and once personal interest starts becoming, you will back off. There was nothing that was not tried but we remained resolute. Those who lose are not going to decline, they must come for you one way or the other, and you have to be resolute to pay some price.
“It was after the consolidation exercise that Nigeria began to fund the private sector. Still unfinished business in that sector, but by the time you finish in all the deals, Nigeria will achieve its rightful place in the community of nations,” he said.
