In an interview on Arise TV on Monday, the Governor of the Central Bank of Nigeria (CBN), Olayemi Cardoso, discussed several critical issues related to foreign exchange stability and monetary policy.
His points offer insights into the CBN’s current priorities and actions to stabilise Nigeria’s economy and currency.
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Here is a summary of seven key points from what Cardoso said during the interview:
FX Obligations: The CBN inherited $7 billion in unpaid forex obligations, and this significant backlog necessitated a closer examination. Deloitte was contracted to conduct a forensic audit to discern valid claims from invalid ones. The audit revealed that out of the $7 billion, around $2.4 billion of the claims had issues. The problematic claims included instances where entities did not have valid import documents, entities that did not exist received allocations, and cases where entities received more forex than they requested or received allocations without requesting any. The CBN has already cleared $2.3 billion of the valid claims, including those from airlines. This leaves a balance of $2.2 billion, which the CBN is confident of addressing very soon.
Naira Stabilisation and Investors’ Interest: Despite the challenges, the Governor expressed confidence that the Naira remains undervalued and will stabilise as reforms and corrective measures are implemented. There are certain reforms ongoing, such as the circular on the Net Open Position (NOP) of banks and guidelines for international money transfer operators, among others. These reforms are expected to drive stability in the FX market. Also, the interview highlighted an increasing interest from foreign portfolio investors in the Nigerian market, which is seen as a positive sign for the economy.
Overpopulation of CBN’s Office: Cardoso addressed the issue of overcrowding at the CBN headquarters. He indicated that the central bank’s internal arrangements were being reorganised for administrative convenience and efficiency. This reorganisation is seen as necessary to address the problems arising from overcrowding and to enhance overall operational efficiency.
Monetary Policy Committee (MPC) Meeting: Regarding the MPC, which is expected to be held this month, Governor Cardoso expressed his focus on ensuring that the MPC is impactful and complements the fiscal side of the economy. He indicated that the MPC’s direction is aligned with the CBN’s renewed focus on stabilising prices and lowering inflation, reflecting the new direction and core mandate of the central bank.
CBN Interventions: Governor Cardoso acknowledged the necessity of interventions in Nigeria, noting their role in channelling resources to those in need. However, he emphasised the importance of having a proper framework to ensure these interventions reach the intended beneficiaries. The CBN plans to focus on its core strengths while collaborating closely with entities with expertise in intervention spaces. This approach aims to avoid the pitfalls of failed interventions and ensure that the resources are used effectively and reach the right people.
NNPC and Foreign Exchange Liquidity: Governor Cardoso highlighted the recent move to have the NNPC and other government agencies move their funding into the Central Bank of Nigeria (CBN) as a positive and confidence-boosting measure. This move is viewed by external observers as a significant step forward. It is expected to create a more transparent market system and increase foreign exchange inflow. By involving major state-owned entities like the NNPC in these reforms, the CBN aims to strengthen the overall financial system and enhance economic stability.
CBN’s Communication Strategy: The Governor mentioned revamping the CBN’s communication strategy and engaging with stakeholders. He also emphasised the positive outlook given by global ratings and the expected significant drop in inflation by year-end due to current economic policies.