By Sehubo Festus
The newly appointed Governor of the Central Bank of Nigeria, Olayemi Cardoso, has outlined his priorities during a Senate screening session. He emphasized his commitment to addressing the apex bank’s backlog of unsettled foreign exchange obligations as a near-term priority.
Cardoso also pledged to enhance transparency, improve corporate governance, and ensure confidence in the autonomy and integrity of the central bank. He acknowledged the importance of resolving issues in the foreign exchange market and stated that failing to address these challenges would hinder progress.
Furthermore, Cardoso affirmed his commitment to maintaining price stability, reverting to evidence-based monetary policies, and discontinuing unconventional monetary policies implemented by his predecessor to strengthen the Nigerian naira.
His screening took place against the backdrop of a challenging economic environment, with the naira nearing 1,000/$ at the parallel market. The official market reported a closing exchange rate of N755.08/$1 on Tuesday, according to data from the FMDQ Exchange.
According to Cardoso, the immediate plan to stabilize the naira will be for the apex bank to settle existing financial obligations and make “transparent rules.”
Describing how to address what he termed as an ‘operational issue’, he said, “Right now, we have a situation where we are aware that there are unsettled obligations by the CBN. Whether it is $4bn, $5bn, or $7bn, I don’t know but definitely the immediate priority will be to verify the authenticity and extent of what is owed.
“Number two, apart from the operational issue, there is one that is system-related that involves ensuring that we come up with rules that are open, and transparent that any of the players in that area understand. We can’t expect foreign investors and portfolio investors to come; we can’t expect them if there is no open, transparent system that everyone understands.
“In setting up those guidelines one will carry the relevant stakeholders along and the comment was made earlier that one should be ready to engage everybody and hear views. Those two things, though they may seem simple, will go a long way to easing up the restrictions we are having on people (investors) that want to come in.”
The immediate past acting CBN Governor, Folashodun Shonubi, on September 6, 2023, said the apex bank had concluded negotiation on dollar debts with commercial banks, disclosing that all forex exchange backlogs would be cleared within one to two weeks.
Also, the newly confirmed CBN governor said to tackle the country’s inflation, the CBN would roll out evidence-based policies.
He said, “When you look at the dimension of inflation, we will be doing evidence-based monetary policy. We shall not be making decisions based on a whim. We will significantly rebound the infrastructural demand with respect to ensuring that our data gathering capacity is enhanced so we can make decisions based on proper data.”
Nigeria’s inflation surged to 25.80 percent in the month of August 2023, 1.72 percentage points higher than the 24.08 percent recorded in the previous month.
The CBN started its monetary policy tightening cycle in May 2022, with its benchmark interest rate from 11.5 percent to 18.75 percent in July this year.
The bank justified this, noting that the rising rate of headline inflation necessitated a hike in interest rates.
However, the apex bank has been unable to curb the rising inflation.
Cardoso further stated that relatively, reliable studies have shown that in the past 10 to 15 years at least 50 percent of inflation has been as a result of money supply and deficit financing.
“This is a big problem at least it certainly has been over a period of time and it’s something we have to face frontally,” he noted.
He said that the CBN would ensure that the issue of deficit financing would not be a problem for the country.
The new governor reiterated his commitment to strict adherence to the CBN ACT of 2007. Additionally, he pledged to engage in biannual reviews with the house as part of his administration’s approach.