Cardoso outlines Nigeria’s approach to credible monetary policy at IMF forum

Governor of the Central Bank of Nigeria (CBN), Olayemi Cardoso, has outlined ‘how the Bank’s approach to committee decision-making, transparency and policy communication has strengthened the credibility of monetary policy in Nigeria.’

Speaking at an International Monetary Fund (IMF) seminar in Bangkok on Thursday, Cardoso shared the CBN’s experience of integrating independent expertise into its Monetary Policy Committee (MPC), managing differing policy perspectives and communicating decisions clearly to financial markets and the public.

The seminar, How Central Banks Decide: Committee Decision-Making and Communication in an Era of Uncertainty, brought together Cardoso, Martin Schlegel, Chairman of the Swiss National Bank’s Governing Board, and Emmanuel Moulin, Governor of the Banque de France and member of the European Central Bank’s Governing Council.

Moderated by IMF First Deputy Managing Director Dan Katz, the discussion examined how central banks balance rigorous internal debate with coherent decisions, maintain policy credibility and communicate effectively amid economic uncertainty.

Cardoso explained that the CBN has strengthened its MPC framework by providing external members with dedicated technical support, opportunities to consult specialists outside the Bank and regular engagement with international central banking experts.

These arrangements include retreats and wider stakeholder engagements that expose members to different economic perspectives beyond formal MPC meetings.

External members are also involved from the outset in Nigeria’s ongoing transition towards inflation targeting, supported by IMF technical assistance, ensuring they have access to the information informing policy development.

Cardoso emphasised that these practices form part of the CBN’s commitment to credible, transparent and well-informed monetary policy decisions.

He also highlighted the Bank’s publication of individual MPC members’ policy statements, providing greater visibility into the reasoning behind their positions.

Cardoso said he personally reviews each statement, including differing perspectives, to better understand members’ assessments and inform subsequent deliberations.

On managing committee debate, he explained that the chairman’s responsibility is to establish areas of common understanding before addressing disagreements and proceeding to a vote.

“What are the things we all agree on? That should be number one. What are the things we don’t really agree on? And then number three, of course, is to vote,” he said.

The approach, Cardoso explained, helps prevent discussions from becoming absorbed in relatively minor disagreements while keeping members focused on the most consequential policy questions.

The international exchange highlighted different approaches to central bank governance and communication.

Schlegel described the Swiss National Bank’s consensus-based model, where governing board members assess the merits and disadvantages of competing policy options before reaching a collective position. The institution does not publicly attribute individual voting positions, an approach he said supports policy coherence and protects members from external pressure.

Moulin discussed the European Central Bank’s evolution towards more inclusive deliberations under President Christine Lagarde, emphasising shared information, consensus-building and a clear policy framework. He also stressed the importance of explaining monetary policy decisions in terms relevant to households, including prices, employment and borrowing costs.

Cardoso illustrated how Nigeria’s approach operates in practice through the September MPC meeting, when members entered deliberations amid uncertainty but reached a common assessment that weaknesses in monetary policy transmission required correction.

That shared understanding helped focus the committee’s deliberations, which resulted in a 350-basis-point reduction in the benchmark interest rate from 26.5% to 23%.

Cardoso explained that the decision reflected Nigeria’s particular economic circumstances, including a distinct inflation cycle shaped by foreign-exchange harmonisation and subsidy reforms, improving macroeconomic conditions and changes to the monetary policy framework.

Although the adjustment surprised financial markets, he said earlier reforms and carefully considered communication helped investors understand the rationale.

“To do such a thing successfully, you must have an element of credibility with the market,” Cardoso said.

He explained that the post-MPC press conference placed the decision within the context of Nigeria’s economic reforms, outlining the progress made and the conditions supporting the adjustment.

Katz observed that markets absorbed the decision without significant disruption, describing the response as evidence of the clarity and credibility established through CBN communications.

The panel also examined the growing role of artificial intelligence in interpreting central bank statements, with Schlegel emphasising precise institutional language and Katz discussing the IMF’s use of AI tools to analyse monetary policy communications.

Schlegel cautioned that AI-generated interpretations remain analytical opinions rather than definitive accounts of policymakers’ intentions.

Closing the session, Katz noted that while central banks operate under different governance arrangements, effective monetary policy decision-making requires candid debate, diverse perspectives, strong leadership and clear communication.
Cardoso’s contribution illustrated Nigeria’s approach to those principles, combining informed participation by external MPC members, transparent individual policy assessments and structured deliberations with a coherent explanation of the committee’s decisions.

The discussion underscored how institutional governance and communication work together to support credible monetary policy, particularly when central banks must make consequential decisions under uncertainty.