• Restates Commitment To Fair, Efficient Markets
• Says Leadership Is About Hard Choices

Ahead of his first year in office, this week, Olayemi Cardoso, Governor of the Central Bank of Nigeria (CBN), at the weekend in Lagos offered explanations as to certain decision of his team within the period, including floating the Naira and repeated hike in the benchmark Monetary Policy Rates in a bid to rein in on inflation..

Cardoso, who was addressing members of the Harvard Club of Nigeria on the topic: “Leadership in Challenging Times: Restoring Credibility, Building Trust, and Containing Inflation,” assured that recent developments in the foreign exchange market and the slowdown in inflation in recent months have vindicated the apex bank’s decisions so far.

One of those, he noted, is containing inflation which remains a core mission, acknowledging that whereas the CBN is yet to meet its target recent declines reported by the National Bureau of Statistics (NBS) in July and August 2024 showed that the apex bank is moving in the right direction.

According to Cardoso, leadership, especially as the head of a central bank, he told his audience, often requires making difficult and sometimes unpopular decisions, assuring that the CBN is a listening institution whose management is not afraid to reconsider decisions made if they fail to achieve the original objectives.

Also, he explained that “Our decision to raise the Monetary Policy Rate (MPR) to 27.25% was a bold move. Higher interest rates, while painful for borrowers, are necessary to curb excess money in circulation and control inflation.

The CBN Governor also explained that the recent decision to implement the Electronic Foreign Exchange Matching System (EFEMS) stems from an understanding of the importance of trust to central banking, reiterating that the CBN seeks to enhance transparency and provide more accurate oversight of foreign exchange transactions.

Trust, he noted, “is the currency of central banking. If the public loses trust in the institution, the efficacy of its policies diminishes.

“Our decision to implement the Electronic Foreign Exchange Matching System (EFEMS) is rooted in this understanding.

“By enhancing transparency and providing more accurate oversight of forex transactions, we send a strong signal that the CBN is serious about fair and efficient markets,” he added.

Highlighting key leadership lessons, Cardoso said it “is about making hard choices to secure long-term stability over short-term comfort in moments like these.

“Leading through challenging times means avoiding the temptation to take on too many initiatives. The Central Bank must focus on its core mandate—price stability. It is easy to become distracted by various political and economic pressures, but as a leader, one must prioritise.

“Effective communication is as important as the right policy. Clear and open communication fosters trust. From publishing the results of the Dutch Auction to ensuring regular updates on economic data, transparency has been our guiding principle. Trust is built on the belief that a central bank will take the necessary steps to ensure economic stability, even when those steps are uncomfortable or politically contentious,” he declared.

According to him, the CBN management under his watch has concentrated on restoring the credit of the institution, noting that “in the face of economic challenges, it is imperative to focus on core objectives—restoring the credibility of the institution, building trust in the financial system, and, most critically, containing inflation. These are not just strategic goals; they are foundational to any meaningful recovery,” he said.

Speaking on his journey on the saddle, he recalled that upon assumption of duty, he understood that the credibility of the CBN had to be the bedrock of the actions he and his team took.

“Without credibility, no policy, however well-intentioned, can succeed. Floating the naira, a decision met with considerable public criticism, was necessary to bring the official exchange rate closer to market reality. The disparity between the official and parallel rates had encouraged arbitrage and speculation, eroding trust in the market.

“Credibility is earned by consistency. The decision to close this gap, while painful in the short term, sent a message to market participants that the CBN was committed to transparency and sound monetary policy,” he added, noting that speculative trading had been reduced, and stability was gradually returning to the currency markets.