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…Works on price discovery for local currency
The governor of the Central Bank of Nigeria Olayemi Cardoso has said the apex bank is collaborating with the ministry of finance and the NNPC to ensure that all forex inflows are returned to the central bank.
Cardoso said the apex bank will be working on price discovery for the nation’s local currency as it believes that the naira. He expressed belief that the naira is currently “undervalued” and, coupled with coordinated measures on the fiscal side, the CBN will expedite genuine price discovery in the near term.
This is even as he said, the CBN is committed to not only clearing the foreign exchange backlogs but will decisively deal with any abuse of the process by anyone. Cardoso made this known while delivering his keynote address at the Launch of the Nigerian Economic Summit Group (NESG) 2024 Macroeconomic Outlook Report, yesterday.
The value of the naira has continued to plummet at both official and parallel ends of the market with the currency trading as low as N1,330 to the dollar at the Nigeria Autonomous Foreign Exchange (NAFEX) window while it sells on the streets at N1,365 to the dollar.
The CBN governor, in his address, said: “We believe that the naira is currently undervalued and, coupled with coordinated measures on the fiscal side, we will expedite genuine price discovery in the near term. This coordinated approach will contribute to a more balanced and stable exchange rate.”
Cardoso stated that, as part of measures to increase foreign exchange inflow and ensure stability of price at the forex market, it is collaborating “with the Ministry of Finance and the NNPC to ensure that all FX inflows are returned to the Central Bank. This coordinated effort will greatly enhance the Bank’s FX flows and contribute to the accretion of reserves.”
The CBN governor noted that the expected stability in the foreign exchange market for 2024 can be attributed to the reduction in petroleum product imports and the recent implementation of a market-determined exchange rate policy by the apex bank.
“This reform is designed to streamline and unify multiple exchange rates, fostering transparency and reducing opportunities for arbitrage. The resulting consistent and stable exchange rate will not only boost investor confidence but also attract foreign investment, elevating Nigeria’s appeal to global investors.
“We are implementing a comprehensive strategy to improve liquidity in our forex markets in the short, medium, and long term. Our focus is on addressing fundamental issues that have hindered the effective operation of our markets over the years,” he pointed out.
Whilst noting that upholding the integrity of financial markets remains crucial for building confidence, he said: “with the completion of an independent forensic review and the subsequent clearance of the backlog of valid forex transactions, we remain steadfast in our commitment to decisively address any infractions and abuses.
“In our efforts to stabilise the exchange rate, it is imperative that we prioritise transparency and create a market environment that enables the fair determination of exchange rates, ensuring stability for businesses and individuals alike.”
He said the approach will contribute to a more balanced and stable exchange rate, adding that his administration will prioritise transparency and create a market environment that enables the fair determination of exchange rates, ensuring stability for businesses and individuals alike.
“This reform is designed to streamline and unify multiple exchange rates, fostering transparency and reducing opportunities for arbitrage. The resulting consistent and stable exchange rate will not only boost investor confidence but also attract foreign investment, elevating Nigeria’s appeal to global investors,” he said.
Nigeria is expected to experience moderate inflationary pressure in 2024. The outlook projects inflation to be at 21.5 per cent in 2024. The NESG projects the unemployment rate to reach five per cent by year-end. Job sector improvement to lower poverty to 41.5 percent. Limited CBN intervention in the FX market is anticipated to result in a positive trajectory for the official exchange rate reaching 900/$.
On external reserves, the NESG said following CBN’s reduced intervention in the FX market and high oil price, foreign reserves are expected to be boosted and hit $40 billion by the end of 2024. NESG chairman Niyi Yusuf said the group stands ready to continue its collaborative efforts with the federal and subnational governments to achieve transformative goals.
“To delve into these policy priorities, we must emphasise the pivotal role of a robust policy environment in laying the foundation for sustainable Macroeconomic stability and economic transformation. We must not relent to build the Nigeria of our dreams. I implore every stakeholder to rise to this occasion and contribute to our quota in rebuilding our economy,” he stated.
The NESG projected a lower economic outlook for Nigeria below the government’s 3.75 per cent rate for 2024. “Our projections anticipate a 3.50 percent growth rate for the Real GDP in 2024,” the economic think-tank said. The International Monetary Fund (IMF) had projected the economy to grow by 2.9 percent in 2024.
NESG’s projection is premised on sundry possibilities and strategic actions that must be taken by the government in connection with the private sector to reflect a positive growth for Nigeria. The economy grew by 2.6 per cent in 2023.
It stated that for Nigeria to consolidate on its growth trajectory, it has to focus on improving productivity in the agriculture sector, revival of the services sector, attracting private investment to specific sectors, and the transformation of production sectors for job creation and global competitiveness.
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