CBN's Olayemi Cardoso Justifies Interest Rate Cut

On October 15, Olayemi Cardoso, the Governor of the Central Bank of Nigeria, defended the bank's decision to reduce the benchmark interest rate from 26.5% to 23% during a panel at the IMF in Bangkok. Cardoso explained that stronger economic conditions provided the Central Bank with the opportunity to address weaknesses in how its policy decisions affect financial markets.

He noted that the adjustment took the market by surprise, which typically does not favor unexpected changes. Cardoso emphasized the importance of better coordination with fiscal authorities and clarity regarding overnight interest rates in creating favorable conditions for the rate cut.

He clarified that the term "cut" was not entirely accurate, suggesting that the rate was "reset" to enhance its effectiveness rather than signal a move towards cheaper money. The decision, made by the Monetary Policy Committee on September 22, also adjusted the standing lending rate to 23.5% and the standing deposit rate to 20%.