Cardoso suggests a CBN reset as the naira falls to $1,000/$

    As the naira dropped to an all-time low of 1,000 to the dollar on the black market, Olayemi Cardoso, who was confirmed as governor of the Central Bank of Nigeria (CBN) by the Senate on Tuesday, has proposed to reset the top bank.

    Since there is a lack of dollars due to poor inflows from oil revenues and foreign capital, Nigeria’s currency has continued to be under pressure.

    From 738/$ at the start of the year on the black market, the naira has lost 35.50 percent of its value versus the dollar.

    Foreign exchange inflows into Nigeria are not keeping up despite the unification of exchange rates in June. On the other hand, there is still a strong demand for foreign currency, which puts pressure on the exchange rate. Players are encouraged to buy foreign exchange on the black market because there is limited access to it on the legitimate market.

    Cardoso stated that as part of steps to combat the present naira freefall, which has turned into a significant burden for the economy, his top goal would be to figure out ways to aggressively offset enormous FX debts.

    …to cease using aggressive development financing
    The incoming CBN governor made a commitment to reduce aggressive development finance, uphold a climate of openness, compliance, and cooperation, and implement a policy of zero tolerance for CBN Act violations.

    He added that “we will also look at the need to refocus CBN back to its core functions,” highlighting the significance of switching to evidence-based monetary policy and establishing an open, transparent, rule-based system.

    Cardoso highlighted immediate or short-term actions to solve the naira free-fall and other economic concerns at the screening at the National Assembly.

    “We do need a stable exchange rate for a nation that we all aspire to,” he remarked. Furthermore, there are short- and medium-term measures. However, since the majority of people are currently bothered by short-term measures, I would want to focus on those.

    The medium-term measures, which naturally focus on maintaining a positive balance of payments, include actions like those already taken to increase access to petroleum resources and diversify the nation’s economy, which I believe the current administration will keep up. Of course, they require time.

    He and his subordinates would have to deal with two very crucial concerns, in his opinion.

    “The first is what I would call an operational issue,” he stated. We currently find ourselves in a scenario where, despite the fact that we can all disagree on the specific figures, we are all aware that the central bank is still liable for some unpaid obligations, which could be worth $4, $5, or even $7 billion.

    However, confirming the veracity of what is happening on the ground will undoubtedly take priority right away. Once we have done that, we must then quickly come up with a solution. If we can’t handle the foreign exchange situation, it would be naïve of us to think that we’ll be making too much progress.

    olayemi Cardoso

    to ensure openness, adherence, and cooperation
    Cardoso stated that in order to draw in significant international investors, the central bank would make sure that rules are open and transparent.

    “We can also anticipate that those players who typically have an impact on your markets won’t do so if you don’t have an open, transparent system that everyone can use – one day it is one way, and the next day you review without warning in setting up those guidelines,” he continued.

    “We will undoubtedly involve pertinent parties, engage the public, and solicit opinions. And clearly, one of the main goals will be to bring all the relevant parties together, assess the situation, and most likely immediately develop a strategy and a game plan that everyone is aware of.

    The adoption of those steps, according to Cardoso, will significantly help “tackle some of the issues we’re having right now in terms of people wanting to come in.”

    “These short-term measures, and no matter what, I know that the impact will be such that we will be able to have investors coming into the market and confidence will come back in,” he continued.

    says zero tolerance for breach of CBN Act key

    Cardoso said under his watch, the central bank will embrace a culture of compliance, which extends to aligning with provisions in the CBN Act.
    He told lawmakers: “We will have zero tolerance for abuse of compliance. That is a cultural shift, a change in mindset, but we will definitely make sure this happens. We are clear as to what the Act says; we are clear as to how we need to visit the House and share the things we are doing.

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    “We will do so because now that we are proposing to reset the central bank, we are open and we are appealing to the members of these sacred chambers to collaborate with us to ensure that there must be discussions with the Senate every six months, from what I gather. Whatever the 2007 Act mandates, we must abide by it. The Act, in my opinion, is a solid and reliable legal document. I believe that the issue of implementation and compliance has been absent.

    According to a recent research by FSDH Research, Nigeria’s real GDP growth of 2.5% for the second quarter of 2023 was still subpar and was led by the non-oil sector. “11 sectors had increased output in the second quarter of 2023 compared to the first quarter. The mining and quarrying industry’s expansion and oil production are both being hampered by crude oil theft.

    As the CBN persisted in intervening in the Investors and Exporters (I&E) FX window, the nation’s external reserves have been trending down.

    The research claims that the high need for foreign currency to pay for goods imports and service payments, limited investment inflows due to low trust, and limited inflows from crude oil sales due to oil theft are the main causes of the pressure on external reserves.

    Investors and other stakeholders would be interested to see how the CBN will be managed and repositioned to fulfill major objectives of price stability, exchange rate, and financial stability with the nomination of Yemi Cardoso as the new CBN Governor, according to analysts at FSDH Research.

    According to them, the CBN governor’s perspectives on interest rate management, currency management, cryptocurrencies, the real situation of the reserves, and the role of the apex bank in financing government (ways and means advances) and development finance will be of particular interest.

    The analysts went on to say, “We anticipate to see a pragmatic and engaged CBN Governor who would seek to win the trust of investors and other stakeholders.

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