Cardoso Proposes Urgent Monetary Reset as Naira Tumbles to 1,000/$ – In a critical response to the naira plummeting to an unprecedented low of 1,000 per US dollar on the parallel market, newly confirmed Governor of the Central Bank of Nigeria (CBN), Olayemi Cardoso, is calling for an urgent ‘reset’ of the apex financial institution.
Since the beginning of the year, the naira has depreciated by a staggering 35.5%, sliding from 738/$, amidst escalating demand for dollars and a crippling dollar shortage. The latter is a result of reduced inflows from oil receipts and foreign capital, further pressurizing the already beleaguered national currency.
Despite efforts to stabilize the economy, such as the exchange rate unification in June, foreign exchange inflows continue to lag. With demand for foreign currency persistently high and official market access limited, many are resorting to the black market, exacerbating the naira’s freefall.
Cardoso, alongside his deputy governors, has outlined immediate and short-term measures to combat the naira’s decline and the associated economic challenges. The CBN’s immediate priority, according to Cardoso, is to aggressively offset substantial foreign exchange obligations. By addressing these unsettled obligations, estimated between $4 and $7 billion, the central bank aims to halt the naira’s rapid devaluation, thereby alleviating the considerable burden on Nigeria’s economy.
As part of his reformative strategy, Cardoso commits to retracting from aggressive development finance, fostering a culture of transparency, compliance, and collaboration, and strictly adhering to the CBN Act with zero tolerance for breaches. He emphasizes the imperative need to realign the CBN with its core functions, advocate for evidence-based monetary policies, and establish an open and transparent ruled-based system to regain investor confidence.
In his address during the screening at the National Assembly, Cardoso acknowledged the need for a stable exchange rate to realize the vision of a prosperous Nigeria. He underscored the importance of timely balance of payments and diversification of the economic base, initiatives already underway by the current administration.
To ensure transparency and attract serious foreign investors, Cardoso assures that rules will be clear, open, and consistently applied. Engaging with relevant stakeholders to understand the market’s dynamics and collaboratively developing well-known strategies and game plans will also be prioritized under his leadership.
Cardoso is confident that the implementation of these measures will attract investors, restore market confidence, and tackle the pressing issues currently facing Nigeria’s financial landscape.
The second quarter of 2023 witnessed a modest real GDP growth of 2.5%, primarily driven by the non-oil sector, as reported by FSDH Research. However, crude oil theft continues to hamper oil output and the growth of the mining & quarrying sector. With external reserves dwindling due to high foreign currency demand, limited investment inflows, and decreased crude oil sales revenue, stakeholders and investors are keenly watching how Cardoso will steer the CBN to achieve price stability, exchange rate management, and financial stability.
Analysts at FSDH Research anticipate a pragmatic and engaging governor who will actively work to win the confidence of investors and other stakeholders, focusing on interest rate management, exchange rate management, cryptocurrency handling, reserves status, and the central bank’s role in government and development financing. With the nation’s eyes on him, Cardoso is expected to lead with diligence and innovation in navigating through these tumultuous economic times.