As Olayemi Cardoso, the newly appointed governor of the Central Bank of Nigeria, assumes full control of the organisation this week, his biggest challenges will be to rebuild trust in the institution after eight years of poor management.
He’ll also have to increase confidence in the nation’s currency; the naira, which has taken a good beating over the years, and produced one of the highest rates of inflation on the continent.
President Bola Tinubu has implemented a number of new measures since taking office in May, including eliminating a $10 billion yearly fuel subsidy and liberalising the foreign exchange market. The much-needed changes, however, negatively affected an already weak economy.
The naira went on free fall precipitously, reaching previously unheard-of lows, and petrol costs have more than tripled, driving the inflation rate to an 18-year high.
However, the CBN governor in response to questions from senators at his screening in Abuja on Tuesday, plans to deploy instant measures that will help strengthen the fragile trust of foreign investors in the Nigerian economy with the expectation that it will put the brakes on the free fall of the naira against the dollar.
The decision is based on two main objectives, including the idea that paying down a sizable amount of past-due dollar debts could relieve the naira’s ongoing pressure and free up foreign currency operations, which have recently been constrained by speculative demand for the dollar.
The second step, which the former Citibank Nigeria chair promised to implement, entails enforcing compliance with all regulations pertaining to making the foreign currency market accessible to investors and transparent.
“A refocused CBN will better serve the country. In restoring the CBN to its core mandate, we must limit CBN to its advisory role and facilitate new regulatory framework,” he said.
Giving an insight into how he will mitigate the free fall of the Naira as against the Greenback, Cardoso highlighted what he called short term and long term measures to address both the devaluation of the Naira and the rising inflationary trend.
Read Also: Senate confirms Cardoso as CBN governor
He said, “On the issue of foreign exchange which everybody has been talking about is very worrisome. It goes without saying that for the sort of country we want we need to have an exchange rate that is very stable. For a country that we all dream of we need to have an exchange rate that is stable.
“The major short term measure has to do with balance of payments over a period of time like the sort of things that are being done already with respect to ensuring that you are getting more Petroleum Resources and diversifying the economic base of the country. That I believe will continue by the present administration and of course it will take time I think we should take that as a medium.
“The more immediate is what you need to look at: Number one, is what I call operational issue.
“We are aware that there are unsettled obligations by the CBN. Whether it is N$4b, N$5b or N$7b, I don’t know but definitely the immediate priority is to ascertain the extent.
“We need to find a way to take care of that. It will be naive for us to be expecting to succeed if we are not able to handle that side of the foreign exchange market.”
Cardoso further explained his second point, saying, “Secondly, we have to be transparent so that any of the players in that market will understand. We have to come up with rules that are transparent that any of the players in that business understands
“You cannot reasonably expect serious foreign investors, portfolio investors Foreign Direct Investment, that is why we were talking about short term we are not going to expect that players
“Those players who will have direct impact on your market will not do so if we do not have an open, transparent system that everybody understands, that can be relied on.
“Those two immediate steps will go a long way to ease up the restrictions and encourage investors to come with their money. The short term measures is something that my team will address. The impact will help us with greater liquidity.
“In setting up those guidelines, one will also have to carry stakeholders along.
“These are two immediate steps that will go a long way to ease up the restrictions and encourage investors to come with their money. The short term measures is something that my team will address. The impact will help us with greater liquidity.
“On the issue of inflation , again there are longer term measures there are shorter term measures and I believe that some of those measures are being taken already.
“We will be looking at evidenced based monetary policies. We must do something about our data capacity to take critical decisions, based on data.”
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