Thursday, 30th November 2023

Cardoso: How CBN will stabilise naira, slow down inflation

By John Akubo (Abuja) and Adaku Onyenucheya (Lagos)
27 September 2023   |   4:10 am
The Senate has confirmed the appointment of Yemi Cardoso as the Central Bank of Nigeria (CBN) governor and four others as deputy governors of the apex bank. 

Olayemi Cardoso

• Projects ambitious $1tr GDP in eight years
• Senate confirms Cardoso, four others as CBN governor, deputies
• Currency round-tripping concerns grow as exchange rate disparity widens

The Senate has confirmed the appointment of Yemi Cardoso as the Central Bank of Nigeria (CBN) governor and four others as deputy governors of the apex bank.

The Senate, during the screening of the CBN team yesterday after resuming from its recess, tasked the new apex bank chiefs to address issues of inflation, naira devaluation, revival of the manufacturing sector and removal of the floating exchange rate to improve the economy and prevent it from collapsing.

The four deputy governors, whose appointments were confirmed by the Senate include: Mrs. Emem Nnana Usoro, Mr. Muhammad Sani Abdullahi Dattijo, Mr. Philip Ikeazor, and Dr. Bala M. Bello.

Cardoso said CBN will be repositioned to grow the size of the Nigerian economy to an ambitious value of $1 trillion in Gross Domestic Product (GDP) in the next eight years.

He also vowed to embrace a culture of compliance and internal control of commercial banks, halt the continuous fall of the Naira in the foreign exchange market and tackle the rising inflation rate.

The senator representing Edo North, Adams Oshiomhole, said the apex bank team must get the monetary policies right with clear focus on specific macroeconomic objectives in job creation, price stability, exchange rate and inflation regime.

Oshiomole kicked against autonomy of monetary authorities to fiscal authority without both relating with the Ministry of Industry, Trade and Investment.

He said the major challenge is complete submission to market voices and relying on the invisible eyes of Adam Smith to regulate and determine the value of the Naira.

The former Edo State governor berated the commencement of market devaluation by the former military head of state, Ibrahim Babangida regime, noting that market voices can never stabilise the Naira.

The Minority Leader, representing Plateau North Senatorial District, Simon Davou Mwadkwon, lamented that the value of the naira is nothing to write home about and the lowest in the world.

He bemoaned the monetary policy on floating of the exchange rate as a short term measure with the naira already a weak currency. He called for a reversal of the policy to help the value of the naira as well as a short term measure to improve and salvage the economy from total collapse.

The Senate Deputy President, Barau Jibrin, charged the CBN team to ensure the internal control mechanism of the commercial banks will be up and running to ensure stability in the nation’s financial system.

Cardoso emphasized the need to restore the apex bank’s independence and credibility by refocusing on its core mandate and ensuring a culture of compliance.

“Much has been made of past CBN forays into development financing such that the lines between monetary policy and fiscal intervention have become blurred. In refocusing CBN to its core mandate, there is a need to pull the CBN back from direct development finance interventions into more limited advisory roles that support economic growth.”

Nigeria’s inflation surged to 25.80 per cent last month, 1.72 per cent points higher than the 24.08 per cent recorded in the previous month. The increase reflects the impact of the removal of petrol subsidy and the devaluation of the official exchange rate on consumer prices.

On addressing the rising inflation, Cardoso noted that the new CBN leadership would “adopt an evidence-based monetary policy and shall not be making decisions based on a whim.”

Cardoso said there are short, medium and long-term measures to address the worrisome foreign exchange rate, dimension of inflation and deficit financing. He said there is a need to have a stable exchange rate if Nigeria must be prosperous, adding that the measures will include economic diversification, and operations such as ensuring rules that are open and transparent for foreign direct investment.

“There are two very important issues that we would have to address. It is an operational issue. Right now, you have a situation about the figures. We are aware of unsettled obligations by the CBN. The immediate priority is to verify the authenticity and extent of what it holds; once we do that we need to promptly find a way to take care of that.

“It will be naive for us to expect that we will be making too much progress if we are not able to handle that side of the foreign exchange market. We cannot reasonably expect serious foreign direct investors or portfolio investors and now we are talking about short-term term in place. We cannot expect that those players who generally have an impact on our market will do so if we do not have an open and transparent system that everybody understands and can rely on, not subject to review without any notice,” he said.

On internal control of the bank, he said CBN will embrace a culture of compliance even with the 2007 Act as well as a cultural shift of zero tolerance for abuse of compliance.

There are mounting concerns that the widening disparity between the dollar and naira may be triggering a new wave of forex round-tripping. The exchange rate between the naira and the dollar has depreciated past N1000/$1 in the last week as rising demand continues to surpass supply.

This unsettling trend has brought to the forefront concerns over a potential surge in currency round-tripping activities, as sources indicate some forex buyers may be exploiting the Interbank Foreign Exchange (I&E) window for personal gains, igniting fears of dire economic consequences.