By Chinwendu Obienyi
It is no longer news that Dr Olayemi Cardoso, recently nominated by President Bola Tinubu, has formally assumed duty as the Governor of the Central Bank of Nigeria (CBN), in acting capacity, pending his confirmation by the Senate.
This follows the resignation of Mr. Godwin Emefiele as Governor of the apex bank.
Similarly, all four Deputy-Governors-Designate have also assumed duty, sequel to the formal resignation of Mr. Folashodun Shonubi, Mrs. Aishah Ahmad, Mr. Edward Lametek Adamu, and Dr. Kingsley Obiora as Deputy Governors of the CBN.
According to a statement released by the apex bank’s Director, Corporate Communications, Dr Isa AbdulMumin, at the weekend, Dr. Cardoso and his colleagues subscribed to the relevant oaths of office at a brief ceremony held at the bank’s Head Office in Abuja, and have since settled down to the task of administering monetary and financial sector policies of the Federal Government.
An economic and Development Policy Advisor, Financial Sector Leader, former Chairman Citi Nigeria and Commissioner for Economic Planning and Budget in Lagos, Cardoso brings over three decades of managerial experience on board. He is an alumnus of Aston University, Birmingham, United Kingdom, where he studied managerial and administrative studies. He also holds a Master’s degree in Public Administration from the Harvard Kennedy School, United States of America.
However, these qualifications would come to test especially as Cardoso and his team will face hurdles which will include stabilising the Naira, addressing foreign exchange issues and managing the impact of global economic factors on the country’s currency.
Although the previous CBN team eliminated all segmentations, implemented a single free-floating exchange rate, and combined all foreign exchange windows into importers’ and exporters’ windows, the Naira suffered due to the strong dollar and a weak country’s weak FX liquidity.
The high volatility of the naira has been attributed to poor liquidity in the Nigerian foreign exchange market – especially on the part of investors and exporters. Investigations reveal that the currency has lost nearly half its value against the US dollar in official markets since June when the new administration led by President Tinubu encouraged the apex bank to stop maintaining high exchange rates.
As at the time of filing this report, the disparity between the official rate and the parallel rate has widened as the official rate currently stands at N747.76/$1 while the currency stood at N995/$1 as forex traders continue grappling with dollar scarcity.
Commenting on this development, the Finance Minister, Olawale Edun, also attributed the catastrophic decline of the naira to the outstanding forward payment debt of $6.8 billion in the foreign exchange market, emphasizing that solving this problem was important to stabilise the domestic currency. Edun said the settlement of these ongoing contracts will not only strengthen the naira but also facilitate additional foreign exchange inflows.
The development has also led to a downgrade of the nation’s stock market by FTSE Russell.
According to the agency, the FX challenge has made it more difficult for institutional investors to repatriate stranded funds.
Despite rising global oil prices, foreign exchange flow into Nigeria has not improved due to factors like oil theft and a decline in foreign direct investment which has continued to pressure the Naira. On the basis of this, Stears, Africa FX Monitor, advised Nigerians to brace for continued downward pressure on Nigeria’s FX rates.
The Africa FX Monitor, in the report released recently, anticipates that the volatility of the Naira will persist in the coming days, with black market rates projected to trade as high as N985 per US Dollar in the short term.
Over the past seven years, Nigeria’s currency has shed over 30 per cent of its value. Despite the recent attempt by the Federal Government to unify the country’s multiple exchange rate system and restore balance to the forex market, Stears’ Africa FX Monitor indicates that market participants are pricing in forex market fundamentals and distortions, leading to ongoing challenges in achieving forex stability.
Economic experts’ views
However, economic experts who spoke at several forums, noted that the new leadership at CBN needs to ensure a calculated monetary policy that is centered around transparency which will bring back confidence as Nigerians are currently concerned about the future stability of the Naira.
Billionaire entrepreneur and business magnate, Tony Elumelu, expressed confidence that the recent change in leadership at the CBN will play a pivotal role in bolstering faith in the nation’s currency.
Elumelu said, “The reason people are accumulating dollars is not because they need it now; it is because of a lack of confidence in the economy.” He went on to express his optimism in the capabilities of the new central bank team, is “very capable” and “will be able to bring confidence”.
Offering some insights on how the CBN can restore confidence, financial expert, Zeal Akaraiwe, said that the apex bank monetary policies must prioritize foreign direct investments over portfolio investment since the former is geared towards infrastructural development and employment opportunities.
He said, “FDI importance is not just the foreign exchange in print. It’s a structured investment into the economy.
When a company comes and builds a $300 billon plant in Nigeria, the plant will work, and operate. You will see the effect on the economy.
Hence, FDI is far more important regarding infrastructural development. They bring employment opportunities, the creation of value”.
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