The Governor of Central Bank of Nigeria (CBN), Mr. Olayemi Cardoso, on Wednesday, said, the bank’s collaborative effort with the Ministry of Finance had ensured that all crude oil sales by the Nigerian National Petroleum Company Limited (NNPCL) were channelled through the central bank, in an attempt to improve and solidify the inflow of foreign exchange (FX) into the economy.
Speaking at the unveiling of the Nigerian Economic Summit Group (NESG) 2024 Macroeconomic Outlook Report, in Lagos, Cardoso said the coordination between the fiscal and monetary authorities would produce a more balanced and stable exchange rate.
Cardoso in a virtual presentation said, “We believe that the naira is currently undervalued and, coupled with coordinated measures on the fiscal side, we will expedite genuine price discovery in the near term.”
The country’s creditors and credit ratings institutions, who believed the naira was overvalued, had repeatedly prevailed on the CBN to float the currency and allow it find its real value. But the naira is now open to market forces, and the apex bank believes the national currency is undervalued.
Cardoso said inflationary pressures were expected to decline in 2024 due to CBN’s inflation-targeting policy, which aims to rein in inflation to 21.4 per cent. He said this would be aided by improved agricultural productivity and the easing of global supply chain pressures, which would benefit businesses by boosting consumer confidence and purchasing power.
He said the anticipated moderation in petrol prices due to the expected operational status of the country’s key government and privately-owned refineries in 2024 remained a pivotal factor in the economic equation.
Cardoso stated that the expected stabilisation or reduction in fuel costs would have far-reaching implications across various sectors, and contribute significantly to overall economic efficiency and resilience.
On the apex bank’s FX initiatives, Cardoso expressed satisfaction with CBN’s collaboration with the Ministry of Finance and NNPCL to ensure that all FX inflows were returned to the central bank. He stated that the coordinated effort would greatly enhance the bank’s FX flows and contribute to the accretion of reserves.
Cardoso added that the expected stability in the foreign exchange market for 2024 could be attributed to the reduction in petroleum product imports and the recent implementation of a market-determined exchange rate policy by the CBN.
According to him, “This reform is designed to streamline and unify multiple exchange rates, fostering transparency and reducing opportunities for arbitrage. The resulting consistent and stable exchange rate will not only boost investor confidence but also attract foreign investment, elevating Nigeria’s appeal to global investors.
“We are implementing a comprehensive strategy to improve liquidity in our FX markets in the short, medium, and long term. Our focus is on addressing fundamental issues that have hindered the effective operation of our markets over the years.
“Upholding the integrity of financial markets is crucial for building confidence. With the completion of an independent forensic review and the subsequent clearance of the backlog of valid FX transactions, we remain steadfast in our commitment to decisively address any infractions and abuses.”
Cardoso stressed that in the effort to stabilise the exchange rate, it was critical to prioritise transparency and create a market environment that enabled the fair determination of exchange rates, and ensured stability for businesses and individuals alike.
He stated that CBN’s adoption of the inflation-targeting framework involved clear communication, use of monetary policy instruments, and collaboration with fiscal authorities to achieve price stability, foster market confidence, and positively influence consumer behaviour.
The CBN governor stressed, “The outlook for decreasing inflation in 2024 will have a profound impact on businesses, providing a more predictable cost environment and potentially leading to lowered policy rates, stimulating investment, fuelling growth, and creating job opportunities.
“Additionally, the bank has reverted to the conventional monetary policy approach with a focus on attaining price stability, which fosters sustainable economic growth for Nigeria.”
Cardoso said the apex bank would vigorously address the various structural impediments to development by tackling institutional deficiencies, and restoring corporate governance in the financial system.
He said efforts were underway to strengthen regulations and implement prudent policies, adding that the CBN would be a reliable partner in fostering economic growth.
He also said the economy was currently at a turning point, explaining that bold reforms are underway across different segments of the economy.
Cardoso said the initial hardship experienced as a result of policy changes were ultimately directed towards addressing identified challenges in a sustainable manner.
The CBN governor further assured both domestic and foreign investors, and other stakeholders, that the economy would transition to a new state of stability in the short-to-medium term, “as we recalibrate our policy toolkits and implement far-reaching measures.”
He added, “I am confident that we are already witnessing positive outcomes, and these will undoubtedly become more apparent in the near future.
“The dedicated and relentless efforts being made are certain to bring about significant and positive changes for our economy.
“Indeed, recent reports from international rating agencies, such as Fitch, Moody’s, and commendations from multilateral banks, like, the World Bank reflect this, with upgrades to Nigeria’s ratings from stable to positive.”
Cardoso explained further, “These reports acknowledge the possible reversal of the deterioration in the country’s fiscal and external position due to the authorities’ reform efforts.
“While noting the painful adjustments, they all identify a direction of travel that will unlock the much-needed growth and development for our economy in the medium to long term.
“I am under no illusion that these commendations are reducing the price of rice in the market or the cost of FX that you need for your businesses or to pay your children’s school fees. These concerns will be addressed shortly.”
Commenting on the NESG Macroeconomic Outlook, Cardoso said the report emphasised the necessity of economic transformation. He said the central theme, “Economic Transformation Roadmap: Medium-Term Policy Priorities,” underscored the requirement for a clearly outlined roadmap comprising distinct, yet interconnected, phases and essential policy recommendations.
Cardoso said the new five-year Strategy for the Central Bank of Nigeria for the period 2024-2028, which was unveiled last week, provided a clear roadmap for achieving the bank’s mandates anchored on price stability and monetary policy effectiveness, robust and resilient financial system, as well as governance, compliance, and advisory to government.
He added, “These form the pillars around which all our actions and activities will revolve, enabling us to deliver on our mission ‘to ensure monetary, price and financial system stability as a catalyst for inclusive growth and sustainable economic development’.
“The work has already started, internally within the bank and across the banking industry, and we are committed to rebuilding an institution that is trusted and respected and promoting confidence in the economy.”
Cardoso stated, “Additionally, the NESG economic transformation roadmap delineates three distinct phases: Stabilisation, Consolidation, and Acceleration, with sequential steps and policy priorities aimed at fostering robust and sustainable economic transformation. The identification of potential ‘Inflection Points’ is crucial for strategic decision-making.
“This is also commendable, as I believe we are as a nation at the point of stabilisation. If the goals of the Stabilisation Phase are achieved, they will have a significant and immediate impact.
“This phase is focused on stabilising macroeconomic indicators such as inflation rate, GDP growth, fiscal balance, and exchange rate, which are essential for steering the country towards economic recovery and laying the groundwork for long-term economic transformation.”
