The Governor of the Central Bank of Nigeria (CBN), Olayemi Cardoso has addressed the pressing concerns surrounding Nigeria’s foreign exchange (forex) challenges.
The governor while addressing pressing issues facing the Nigeria’s foreign exchange among others gave insights, which come at a time when the nation grapples with currency volatility and economic uncertainties, which were immediately followed by a series of informative posts on X, a popular social media platform that serves as a pulse for national economic discourse.
The interview pronouncements read as follows:
“In the short term, we have put in significant work, and we are witnessing results in improving the market structures and removing all the bottlenecks stifling the supply of FX into the country.”
“We have addressed the challenges to remittance flows, reduced the ability of banks to hold on to positions, and more importantly, we now have the export proceeds from the national energy sector flowing back through the Central Bank. We have also initiated a number of short-term measures to make naira assets attractive to foreign investors”
“The eventual stability of the Naira will be driven by our ability to address the fundamental issues affecting our economy…bring inflation under control and promote the growth of Nigerian businesses such that we eventually export much more than we consume as a nation.”
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Short-to-Medium Term Strategy Focus on Improving FX Inflows and Stabilising the Naira
1. Our policy focus is on achieving rate stability and maintaining market flexibility and liquidity. The move to unify the naira exchange rate and lift currency trading restrictions in June 2023 aims to establish market-driven rates through price discovery. This strategy seeks to create a more efficient and transparent FX market to boost investor confidence and reduce market volatility.
2. Over the past six months, the Bank has taken deliberate steps to enhance liquidity and FX supply in the forex market. All FX transaction windows have been consolidated into the NAFEM platform. Outstanding FX obligations, particularly those of foreign airlines, have been progressively settled. Enhanced monitoring of FX market activities and a continued emphasis on transparency and price discovery are key priorities. These efforts will be further consolidated in the future.
3. Recently, the CBN removed the exchange rate cap to enable International Money Transfer Operators (IMTOs) to disburse remittances at market-determined rates without restrictions, following a willing seller, willing buyer approach. Additionally, the transfer of the NNPC account to the CBN, as directed by Mr. President, aims to increase liquidity in the market. These measures address the FX market’s liquidity challenges, streamline capital flows, and mitigate currency risks.
4. In line with coordinated monetary and fiscal policies, efforts are underway to ensure that all USD-earning agencies and parastatals remit their earnings directly to the CBN to enhance transparency and liquidity in the FX market.
Medium-to-Long Term Strategy Focus on Improving FX Inflows and Stabilising the Naira
1. The CBN is currently devising strategies to revamp the Bureau de Change (BDC) segment for enhanced efficiency and aims to streamline their numbers for better management and supervision.
2. Exploring mechanisms to incentivise individuals holding foreign currency (FCY) outside the banking system to deposit these funds within the banking system, necessitating the establishment of a legal framework.
3. Plans are underway to establish an Investor Relations Group (IRG) modelled after the Philippines to elevate Nigeria’s credit profile and position the country as a prime investment destination.
4. Introducing a single FCY gateway bank to centralise all correspondent banking activities, currently dominated by two major banks in the corresponding banking space.
5. Strengthening surveillance and technological capabilities to monitor cryptocurrency transactions effectively.
Source: X
