I’ll Clear Dollar Debts, Suspend Intervention Loans – Cardoso
The new Governor of the Central Bank of Nigeria (CBN) Olayemi Cardoso, has said he will prioritise clearing the apex bank’s backlog of unsettled foreign exchange obligations in the near term.
He said this on Tuesday during the screening session of members of the Senate.
Cardoso promises to enhance transparency, fix corporate governance, and ensure confidence in the autonomy and integrity of the bank.
“We need to promptly find a way to take care of that. It would be naive for us to expect that we’ll be making too much progress if we’re not able to handle that side of the foreign exchange market,” he said.
The new CBN governor said he would maintain price stability, revert to evidence-based monetary policies, and discontinue his predecessor’s unorthodox monetary policies to bolster the country’s naira currency.
Cardoso’s screening as the nation grapples with falling economic indices with the naira nearing 1,000/$ at the parallel market.
The official market closed with the naira-to-dollar exchange rate settling at N755.08/$1 on Tuesday, according to the foreign exchange data released by the FMDQ Exchange
According to Cardoso, the immediate plan to stabilise the naira will be for the apex bank to settle existing financial obligations and make “transparent rules.”
Describing how to address what he termed as an ‘operational issue’, he said, “Right now, we have a situation where we are aware that there are unsettled obligations by the CBN. Whether it is $4bn, $5bn or $7bn, I don’t know but definitely the immediate priority will be to verify the authenticity and extent of what is owed.
“Number two, apart from the operational issue, there is one that is system related that involves ensuring that we come up with rules that are open, transparent that any of the players in that area understands. We can’t expect foreign investors and portfolio investors to come; we can’t expect them if there is no open, transparent system that everyone understands.
“In setting up those guidelines one will carry the relevant stakeholders along and the comment was made earlier that one should be ready to engage everybody and hear views. Those two things, though they may seem simple, will go a long way to easing up the restrictions we are having on people (investors) that want to come in.”
The immediate past acting CBN Governor, Folashodun Shonubi, on September 6, 2023, said the apex bank had concluded negotiation on dollar debts with commercial banks, disclosing that all forex exchange backlogs would be cleared within one to two weeks.
However, it was earlier reported that over two weeks after the CBN promised to clear the over $10bn foreign exchange debts owed Deposit Money Bank, the apex bank had yet to do so.
Also, the newly confirmed CBN governor said to tackle the country’s inflation, the CBN would roll out evidence-based policies.
He said, “When you look at the dimension of inflation, we will be doing evidence-based monetary policy. We shall not be making decisions based on a whim. We will significantly rebound the infrastructural demand with respect to ensuring that our data gathering capacity is enhanced so we can make decisions based on proper data.”
Nigeria’s inflation surged to 25.80 per cent in the month of August 2023, 1.72 percentage points higher than the 24.08 per cent recorded in the previous month.
The CBN started its monetary policy tightening cycle in May 2022, with its benchmark interest rate from 11.5 per cent to 18.75 per cent in July this year.
The bank justified this, noting that the rising rate of headline inflation necessitated the hike in interest rate.
However, the apex bank has been unable to curb the rising inflation.
Cardoso further stated that relatively, reliable studies have shown that in the past 10 to 15 years at least 50 per cent of inflation has been as a result of money supply and deficit financing.
“This is a big problem at least it certainly has been over a period of time and it’s something we have to face frontally,” he noted.
He said that the CBN would ensure that the issue of deficit financing would not be a problem for the country.
Cardoso added that avoiding deficit financing would tackle money supply issues.
