Yemi Cardoso, the Governor of the Central Bank of Nigeria (CBN), 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 move rests on two key strategies including the belief that clearing a vast overhang of due dollar obligations could ease the prolonged pressure on the naira and free up operations of the foreign exchange, which lately has been strained by speculative demand for the dollar.
The second measure involves enforcing compliance with all rules that pertain to making the foreign exchange market open and transparent to investors, which the former Citibank Nigeria chair said he would make happen.
“We are aware that there are unsettled obligations by the central bank, we are aware there are unsettled obligations. Whether it is 4 billion (dollars), 5 billion, 7 billion, I don’t know,” the CBN governor said in response to questions from senators at his screening in Abuja on Tuesday.
“But definitely, the immediate priority will be to be able to verify the authenticity and the extent of what is owed… It would be naïve of us to expect that we will be making too much progress if we’re not able to handle that side of the foreign exchange market.”
That sentiment in some way aligns with that of Wale Edun, the minister of finance and coordinating minister of the economy, who last week said in New York that it will take clearing Nigeria’s outstanding forward payment of $6.8 billion for naira to have a chance of stability.
Now at its record low in the parallel market, the naira exchanged at 1,006 to a dollar on the street as of 10:53 WAT on Tuesday, according to @naira_rates, which tracks black market rates using API.
It was quoted at 755.1 on the official at market close, according to the FMDQ Securities Exchange, gaining 2 per cent against the US currency.
Nigeria weakened its currency by 40 per cent barely a fortnight after President Bola Tinubu was sworn into office towards the end of May, allowing the country’s previous multiple exchange rates to converge around the rate offered on the parallel market, one of the sweeping actions taken to rebuild investors’ confidence.
Going by Tuesday’s data, the black market has diverged from the parity achieved in the middle of June by at least 58 per cent.
Concerns exist among analysts around choosing someone with a commercial banking background rather than a professional with experience in central banking to lead the CBN.
History shows appointing a person from outside the institution sometimes creates a situation where the CBN leadership in its dealings with lenders is not able to oversee banks at arm’s length as a true regulator.
“Central banking is about policy. It is not about marketing, it is not about seeking profit. It is about getting monetary policies right with a specific focus on macroeconomic objectives,” said Adams Oshiomhole, the senator representing Edo North Senatorial District, while directing a question at Mr Cardoso and his four deputies who were simultaneously screened.
“Even in government when I was commissioner for economic planning and budget, I have a reputation of doing things properly and I am not about to compromise that reputation for anything,” the acting CBN head replied.
“So if there’s any doubt about that, I want you to dispel your minds from it.”(PREMIUM TIMES)