The Governor of Central Bank of Nigeria (CBN), Olayemi Cardoso has called on Nigerians to moderate the demand for dollars, consumption and usage of foreign goods, warning that as a country, we must address the supply side of Forex as it has kept the nation’s economy in a narrow bucket.
Cardoso noted that without moderation of demands on USD, the CBN has no magic wand to hurriedly get Naira stabilized. He however said that series of measures put in place by the apex bank recently are yielding results with inflow of about $1billion into the economy, adding that the apex does not have the capacity to do intervention, but will partner rather than get involved in it directly, and run the risk associated with intervention.
Speaking yesterday in Abuja when he appeared before the Senate Joint Committees on Finance, Banking and other Financial Institutions and National Planning, Cardoso noted that CBN’s target on inflation is to moderate it to 21.4%, and that the adoption of inflation-targeting framework involves clear communication and collaboration with fiscal authorities to achieve price stability, potentially leading to lowered policy rates, stimulating investment, and creating job opportunities.
According to the CBN Governor, the Monetary Policy Committee (MPC) meeting that is scheduled for 26th and 27th of February is also expected to review the situation and take further decisions on these important issues.
Cardoso explained that the shift to a single rate was to stabilize the market and address exchange rate volatility and claimed that over $1billion has come to the market. He said that the market has been responding to the policy that has been put in place. According to him, “for these measures to be sustainable, we must moderate our demands for forex. We are working very hard to bring back credibility to the CBN and many of the investors who over the years have considered the environment inimical, we don’t have to beg them. If we are doing the right thing, investors will come. For them to come, they have to believe that you will do the right things.
“I also want to say that in establishing credibility, there are certain things that we needed to do. We must moderate our demands for forex. Where there are opportunities to substitute locally, we should. The total quantum for education and medical are more than our external reserves. If we are able to up our game on education, medicals, there won’t be need for our people to go abroad. The Nigerian foreign exchange market is currently facing increased demand pressures, causing a continuous decline in the value of the naira. Factors contributing to this situation include speculative forex demand, inadequate forex supply, increased capital outflows, and excess liquidity.
“To address exchange rate volatility, a comprehensive strategy has been initiated to enhance liquidity in the FX markets. This includes unifying FX market segments, clearing outstanding FX obligations, introducing new operational mechanisms for BDCs and IMTOs, enforcing the Net Open Position limit, Open Market Operations and adjusting the remunerable Standing Deposit Facility cap among others.
“These measures, aimed at ensuring a more market-oriented mechanism for exchange rate determination, will boost foreign exchange inflows, stabilize the exchange rate, and minimize its pass-through to domestic inflation.
“Indeed, they have already started yielding early results with significant interest from Foreign Portfolio Investors (FPIs) that have already begun to supply the much-needed foreign exchange to the economy.
“For example, upwards of $1 billion in the last few days came in to subscribe to the Nigeria Treasury Bill auction of 1 trillion Naira which saw an oversubscription earlier this week.
“Our measures aimed at improving USD supply into the Nigerian economy, has significant potential in taming the volatility of the exchange rates. However, for these measures to be sustainable, we must as a country, moderate our demand for FX.
On inflation rate, the apex bank governor assured Nigerians that it will reduce to 21.4% in 2024. “Inflationary pressures are expected to decline in 2024 due to the CBN’s inflation-targeting policy, aiming to rein in inflation to 21.4 percent at the medium term, aided by improved agricultural productivity and easing global supply chain pressures”, he said.
Aside the CBN Governor ‘top government functionaries like the Ministers of Finance, Wale Edun, Budget and National Planning, Senator Atiku Bagudu, Agriculture and Food Security, Senator Abubakar, also made presentations based on questions asked by the Senators on the State of Economy. In his remarks, the Minister of Finance and Coordinating Minister of the Economy, Wale Edun noted that there was the need to ensure that government expenditure are wisely spent.
“For the medium terms, let us know that the fiscal and monetary measures will yield the target goals.
Difficult reforms take time for the benefit to come through but our goal is to minimize the pains before the gains!”
Meanwhile, the Minister of National planning, Senator Atiku Bagudu and the Minister of Agriculture and Food Security, Senator Abubakar Kyari have lamented that farmers were the worst hit with the subsidy removal and floating of the naira.
Bagudu noted that cost of fuel was affecting planting by farmers, adding that the benefit of fuel subsidy reforms have to be supported by measures that will guarantee food production and stability.
On his part, the Minister of Agriculture and Food Security Abubakar Kyari expressed concern that while government was subsiding farming implements, cost of fuel and insecurity were having negative impact on farming.
On his part, Chairman, Senate Committee on Finance, Senator Sani Musa, queried the $3.3billion collected as loan to rescue the Naira, since expected positive effects are not being felt, months after.
The Chairman of Committee on Banking, Insurance and other Financial Institutions, Senator Adetokunbo Abiru, underscored the need for a forensic investigation of past transactions and the issue of compliance of the bank.
He said, “we have serious economic challenges, they are largely macroeconomic challenges. “We have inflation in several countries including developing countries but in Nigeria, we have inflation at almost 20%. What special measures do we have to address this?
“Do we have the place to assist the government to boost food supply in a way to also reduce the weight of food inflation in the consumer price index?
In his remarks, Senator Orji Uzor Kalu, who called for the ban of dollar use in Nigeria, stressed that the government must go back to abolish the use of dollars in business transactions. He said, “What plans are you putting in place to strengthen the Naira? We must go back to abolish the use of dollars unless to those who are authorised.
“In South Africa, nobody buys anything with dollars. I can see the shops in Abuja putting their goods to be bought in dollars. So what have you done? Where we are now, there is no foreign direct investment that will come to Nigeria, I’m really worried. People are leaving.
“And what else have you made to bring to book those 2.7 billion dollars that you say that they have been in default of the documents? Who are the Nigerians that have defaulted these documents?
“You must bring them to book and you must make it public because people are attacking us. I can’t go to my constituency. If I go to my constituency, people are hungry, people are shouting at us, and people think we the senators are the cause of the economic problem. We are just making laws. It’s left for you people to execute it.
“So for me, what plans are you making right away to reconcile with NLC and TUC? They have given a 14-day ultimatum. What are we doing to stop that movement? Because I don’t want to see people say this is politics, this is not politics. These people are legitimately doing what they are doing”, he added.
In his remarks, Chairman of the Joint Committees, Senator Yahaya Abdullahi, said, “We in the National Assembly are united and we are with the executive arm of government to move this nation forward. We have to sit down to put on our thinking caps and work together to address these issues that are bedevelling this country”.
