Nigeria central bank aims for 21% inflation, seeks to support naira

By Elisha Bala-Gbogbo

ABUJA (Reuters) -Nigeria’s central bank aims for inflation to fall to about 21% and will work to strengthen the country’s undervalued naira currency, Governor Olayemi Cardoso said on Wednesday.

Cardoso faces pressure to raise interest rates when the Central Bank of Nigeria (CBN) holds a rate-setting meeting next month for the first time since he took office in September.

Inflation in December hit 28.92%, its highest level in more than 27 years.

“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 said in a speech, a copy of which the central bank shared by email.

He added improved agricultural output and the easing of global supply chain pressures would boost consumer confidence and purchasing power.

Nigeria’s central bank is expected to pursue a more conventional monetary policy approach under Cardoso after years of unorthodox policies pursued by his predecessor, Godwin Emefiele.

In November, Cardoso announced the adoption of an inflation-targeting framework.

President Bola Tinubu made a series of reforms after becoming head of state last year, including scrapping a petrol subsidy and easing currency trading restrictions.

But the country still has a shortage of forex and suffers as a result of a wide gap between the official and parallel market exchange rates.

“We believe that the naira is currently undervalued and, coupled with coordinated measures on the fiscal side, we will expedite genuine price discovery in the near term,” Cardoso said. “This coordinated approach will contribute to a more balanced and stable exchange rate.”

Cardoso said the CBN was trying to improve liquidity in the foreign exchange market, reiterating a pledge to clear outstanding FX obligations after paying at least $2 billion of the estimated $7 billion owed.

(Additional reporting by Camillus EbohEditing by Alexander Winning and Barbara Lewis)