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The Central Bank of Nigeria (CBN) has adopted an explicit inflation targeting regime to foster price stability, and is committed to achieving monetary and price stability, according to Olayemi Cardoso, Governor of the apex bank.
Cardoso made the statement in his first policy speech on Friday since becoming governor in September, at the Chartered Institute of Bankers of Nigeria’s annual dinner in Lagos, Nigeria’s commercial hub.
Inflation targeting is a central banking policy that revolves around adjusting monetary policy to achieve a specified annual rate of inflation. This is known as the target rate.
“This is not just technical but has real life implication. We have been focused on this in the past 2 months,” Cardoso said.
“Dislocation of our monetary transmission mechanisms is rendering the MPC policies redundant. We need to ensure these meetings are effective. Regular open market operations (OMO) to mop up liquidity has also ensued.”
The principle of inflation targeting is based on the belief that long-term economic growth is best achieved by maintaining price stability, and price stability is achieved by controlling inflation.
Nigeria’s annual inflation rate rose to 27.33 per cent in October from 26.72 per cent in the previous month, the National Bureau of Statistics (NBS) said.
The CBN envisions that it will rebuild its reserves with daily FX market trading of $1 billion, Cardoso said.
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