During a recent address to the Harvard Club of Nigeria in Lagos, Central Bank of Nigeria (CBN) Governor, Mr. Cardoso, emphasized the critical role of trust in central banking while discussing the bank’s recent initiatives, including the implementation of the Electronic Foreign Exchange Matching System (EFEMS). His speech focused on the theme “Leadership in Challenging Times: Restoring Credibility, Building Trust, and Containing Inflation.”
Cardoso articulated the rationale behind the CBN’s decision to raise the Monetary Policy Rate (MPR) to 27.25%, describing it as a necessary measure to control inflation and curb excess money circulation. He acknowledged that while higher interest rates can burden borrowers, they are essential for ensuring long-term economic stability. “Leadership is about making hard choices to secure long-term stability over short-term comfort in moments like these,” he stated.
The CBN governor shared several key leadership lessons, underscoring the importance of focusing on core mandates, particularly price stability. He warned against the temptation to take on too many initiatives amid political and economic pressures, emphasizing that effective communication is just as critical as implementing the right policies. By fostering transparency—through regular updates on economic data and publishing auction results—he highlighted the importance of building trust with the public.
“Trust is the currency of central banking,” Cardoso remarked, stressing that the effectiveness of monetary policies diminishes if public trust is lost. He pointed out that the CBN’s decision to implement EFEMS was driven by the understanding that transparency and accurate oversight of foreign exchange transactions are vital for establishing fair and efficient markets.
As he approaches his one-year anniversary in office, Cardoso reflected on the challenges of leading a central bank, where difficult and sometimes unpopular decisions are necessary. He reiterated the CBN’s commitment to its core objectives: restoring institutional credibility, building trust in the financial system, and containing inflation, which he regards as foundational to meaningful economic recovery.
He acknowledged the criticism faced when the naira was floated but deemed it necessary to align the official exchange rate with market realities. Addressing the disparity between official and parallel rates, he noted that such discrepancies had fostered speculation and eroded trust in the market. “Credibility is earned by consistency,” he asserted, indicating that closing the gap, though painful initially, signaled the CBN’s commitment to transparency and sound monetary policy.
Cardoso concluded on a hopeful note, stating that speculative trading had diminished and stability was gradually returning to the currency markets, a positive sign for the nation’s economic landscape.