(Bloomberg) -- Nigeria’s central bank Governor Olayemi Cardoso said the bank is “relatively pleased” with the progress it has made in stabilizing the naira and believes the excessive volatility may be a thing of the past.

“I do believe that we have more or less seen the worst in terms of volatility,” Cardoso said in an interview with Bloomberg TV on Tuesday. “We are also very alive to observing the way and manner in which that market operates and ensuring that it gives the best value that that can be accomplished using certain tools,” he said.

Cardoso said reviving confidence in the naira is crucial for the West African nation to lure investors. The central bank since the former Citigroup Inc. executive took office in September has increased interest rates by 750 basis points to 26.25%, cleared a foreign-exchange backlog and overhauled the country’s exchange rate policies - effectively devaluing the naira. That’s helped stabilize the naira, even though it’s still the world’s worst performing currency this year after the Lebanese pound.  

“Our thoughts align with those of the governor,” said Olumide Sole, analyst at Lagos-based Vetiva Capital Management Ltd. “Based on the purchasing power parity model, the naira is currently valued at 900 naira levels, which is far less than the current market price.”

The naira has been trading in a narrow range between 1,473 and 1,490 per dollar this month. It fell 0.3% to 1,492.71 to the dollar on Tuesday. 

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“We’re relatively pleased with where we are,” Cardoso said. Even so, he said the central bank needs to do more. “It’s continuous work in progress. And we will do everything possible to ensure that we continue to manage the macroeconomic fundamentals that affect that.”

The steps have also seen the annual inflation rate that’s remained stubbornly high — because of the currency devaluation, food insecurity and the removal of energy subsidies — rising at a slower pace. Consumer prices rose 34% last month, compared with 33.7% in April, suggesting that it’s approaching a peak.

The governor refused to be drawn on whether this could signal the end to the tightening cycle that began in May 2022, when the central bank’s monetary policy committee meets in mid-July.

“Data will direct whether they see further hikes or not,” he said. “The MPC has been very clear in stating that they see inflation as a major impediment for the future of Nigeria, and they will do everything possible to ensure that they keep inflation in check and in fact bring it down as reasonably as they can and I don’t see that changing.”

He also made clear that the central bank will use orthodox monetary policy to achieve its goals. 

The central bank’s steps and fiscal reforms undertaken by President Bola Tinubu’s administration have assisted the nation in securing much needed liquidly. The World Bank earlier this month approved $2.25 billion in funding to support Nigeria’s economic reforms helping boost its foreign exchange reserves. 

The governor said the central bank would support further measures to build the country’s reserves including a eurobond issue. 

“We should have a diversity of sources,” Cardoso said. “It shouldn’t just be the eurobond market, it shouldn’t just be foreign portfolio investors, it should be a hodgepodge of different things.” 

Building those reserves will be crucial for the central bank to be able to meet demand in the foreign-exchange market to sustain the gains it’s made in stabilizing the naira, Sole said.

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--With assistance from Anthony Osae-Brown and William Clowes.

(Updates with analyst comment in fourth paragraph.)

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