VAM News Update
Olayemi Cardoso, who was confirmed Tuesday by the Senate as governor of the Central Bank of Nigeria (CBN), alongside his deputies, has proposed to reset the apex bank, as the naira fell to an all-time low of 1,000 per dollar on the parallel market.
Nigeria’s currency has remained under pressure following increased demand for dollars amid dollar shortage occasioned by low inflows from oil receipt and foreign capital.
The naira has lost 35.50 percent of its value against the dollar, falling from 738/$ at the beginning of the year on the parallel market.
Despite the exchange rate unification in June, foreign exchange inflows into Nigeria are lagging. On the other hand, the demand for foreign currency remains high, thereby creating pressure on the exchange rate. In addition, limited access to FX in the official market are incentivising players to purchase FX in the black market.
Cardoso said his immediate priority would be to work out ways to aggressively offset huge FX obligations as part of measures to attack the current naira freefall, which has become a huge burden for the economy.
…to pull back from aggressive development finance
The new CBN governor promised to pull back from aggressive development finance, ensure a culture of transparency, compliance and collaboration and to embark on zero tolerance for breach of CBN Act.
“We will also look at the need to refocus CBN back to its core functions,” he said, stressing the need to reverse to evidence-based monetary policies and emplace an open, transparent, ruled-based system.
During the screening at the National Assembly, Cardoso outlined immediate or short-term measures towards addressing naira free-fall and other economic challenges.
He said: “We do need to have an exchange rate that is stable for a country that we all dream of. And quite frankly, there are short and medium-term measures, but I would say something about the short-term measures because that really is what bothers most people today.
“Understandably, the medium-term measures have to do with balance of payments on time, like the sorts of things that are being done already, with respect to ensuring that you’re getting more petroleum resources and diversifying the economic base of the country that I believe will continue by the present administration. And of course they take time.”
According to him, there are two very important issues that he and his deputies would have to address.
He said:
“Number one is that of what I would term an operational issue. Right now we have this situation where we all know that we can argue about the numbers, but we are aware that the central bank has some unsettled obligations, whether it’s $4 billion, $5 billion, $7 billion, I don’t know.
“But definitely the immediate priority will be to be able to verify the authenticity of what is on ground and then of course, 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’ll be making too much progress if we’re not able to handle that challenge of foreign exchange.”