CBN targets single-digit inflation with policy shift

The Central Bank of Nigeria (CBN) has reiterated its commitment to adopting a full-fledged inflation-targeting monetary policy framework as part of efforts to ensure long-term price stability and strengthen economic resilience.

This position was made known by the CBN Deputy Governor in charge of Economic Policy, Dr. Muhammad Abdullahi, during a strategic engagement with members of the Nigerian Economic Society (NES) and the academic community in Abuja.

Abdullahi described the engagement as timely, noting that it aligns with Nigeria’s broader economic reform agenda. He explained that the transition to inflation targeting represents a move toward a more transparent, forward-looking, and rules-based monetary policy system.

According to him, inflation targeting would act as a key anchor for the economy by shaping market expectations, reducing the impact of supply-side shocks, and enhancing the credibility of monetary policy.

He added that stabilising inflation expectations would help lower risk premiums, encourage long-term investments, and allow policymakers to focus beyond short-term economic disruptions, especially amid global uncertainties such as geopolitical tensions and fluctuating energy prices.

The deputy governor outlined key reforms supporting the transition, including a return to orthodox monetary policy tools, withdrawal from quasi-fiscal activities, and strengthened institutional independence.

He also highlighted foreign exchange reforms such as rate unification and the introduction of electronic trading platforms, which he said have improved market transparency and reduced volatility.

Other measures, including bank recapitalisation and enhanced prudential oversight, have contributed to improved financial sector stability, while better coordination with fiscal authorities has strengthened policy coherence.

Abdullahi revealed that these reforms are already yielding results, with Nigeria’s headline inflation dropping significantly from 34.8 per cent in late 2024 to 15.1 per cent by early 2026.

He expressed optimism that inflation would continue to decline, with a medium-term target of achieving a single-digit rate between 6 and 9 per cent, provided there are no major external shocks.

Also speaking, the Director of the Monetary Policy Department at the CBN, Dr. Victor Oboh, emphasised the importance of collaboration with the academic community in improving policy effectiveness and sustaining macroeconomic stability.

Oboh noted that beyond technical expertise, the success of inflation targeting depends heavily on public trust and clear communication, stressing the role of academics and researchers in shaping economic narratives and supporting evidence-based policymaking.

While acknowledging potential challenges, including short-term trade-offs and the need to strengthen institutional credibility, he expressed confidence in the joint efforts of the CBN and NES.

In his remarks, the President and Chairman of the NES, Dr. Baba Musa, commended the apex bank for its reform-driven approach and openness to collaboration.

He reaffirmed the society’s support for the CBN’s stabilisation efforts, stressing the importance of a credible central bank in achieving sustainable economic growth.