Weekly Report: The CBN’s inflation-targeting success hinges on a robust monetary policy transmission

Nigeria’s 6-9% inflation target was introduced by the former Central Bank of Nigeria (CBN) governor Lamido Sanusi in 2013. However, since 2015, inflation has remained in double digits, above this target band. Between 2015 and 2023, annual inflation averaged 16.2%, 7.2 percentage points above the target ceiling of 9%. In January 2024, inflation spiked even further to a 28-year high of 29.9%.

To address Nigeria’s worsening inflation, Yemi Cardoso, the current CBN governor, recently signalled renewed commitments to adopt the inflation-targeting (IT) framework, which has been in the pipeline since 2013. In a speech to the Senate, Cardoso announced a 2024 inflation target of 21.4% to kick off the adoption of the IT framework. While this target is 3.1 percentage points below the 24.5% average inflation in 2023, it remains significantly far from the target band of 6-9%. 

Still, the CBN’s IT adoption is positive for the economy, considering that