Home Economy CBN Governor Blames Nigerians for Weak Naira

CBN Governor Blames Nigerians for Weak Naira

by News Desk
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Against the backdrop of recent protests in Kano and Niger states over the level of suffering Nigerians are currently experiencing, Civil Society Organisations (CSOs) and some other stakeholders have warned President Bola Ahmed Tinubu against joking with the development.

However, the Central Bank of Nigeria (CBN) Governor, Olayemi Cardoso; Ministers of Finance, Wale Edun; Budget and National Planning, Senator Atiku Bagudu; Agriculture and Food Security, Senator Abubakar Kyari, yesterday, explained in details the steps being taken by the Federal Government to stabilise the economy by addressing the spiraling inflation and volatile foreign exchange regime that have pushed millions of Nigerians below the poverty line.

The top government officials spoke during an interactive session with the Senate Committees on Finance, Appropriations, Banking, Insurance and other Financial Institutions, at the Senate Chamber, National Assembly Complex, Abuja.

Cardoso, who was the first to address the senators, attributed the weakness of the naira to the insatiable appetite of Nigerians for the dollar and foreign goods, stressing that without moderation for demands for USD, the CBN has no magic wand to stop the free fall of the naira. He has, therefore, urged Nigerians, especially the elite, to reduce their appetite for the dollar, consumption and usage of foreign goods; and patronage of foreign schools and hospitals.

He, however, informed members of the committees that series of measures put in place by the apex bank recently to strengthen the economy were yielding results, disclosing that there has been an inflow of about $1billion into the economy.He also indicated that the Nigerian foreign exchange market is currently facing increased demand pressures, causing a continuous decline in the value of the naira. He told the lawmakers that the apex financial institution in the country had no magic wand to hurriedly get the naira stabilised. He words: “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.

“The measures, aimed at ensuring a more market-oriented mechanism for exchange rate determination, will boost foreign exchange inflows, stabilise the exchange rate and minimise 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 N1 trillion, 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. 

“It is also clear that the task of stabilising the exchange rate, while an official mandate of the CBN, would necessitate efforts beyond the Bank itself. It will also include actions by corporates and individuals to reduce our frequent demand for the dollar for business and personal needs.”

On inflation rate, the apex bank governor gave assurance that it would reduce to 21.4 per cent in 2024. He said: “Inflationary pressures are expected to decline in 2024 due to the CBN’s inflation-targeting policy, aiming to rein in inflation to 21.4 per cent at the medium term, aided by improved agricultural productivity and easing global supply chain pressures.”

He attributed the current food crisis in the country to insecurity, and natural causes. Cardoso further said: “The upward trend of food inflation is primarily due to supply shocks caused by insecurity, climate-induced factors such as flood and rainfall shortage.

“In some cases, inefficient, subsistent and seasonal farming practices as well as importation bottle necks that have impacted the prices of imported food items are also critical factors.

“Anecdotal evidence indicates that recent exchange rate volatility has fuelled more foreign demands for agricultural products, especially, from neighbouring countries. 

“While this presents an opportunity to expand and boost agricultural output, hence creating jobs in the sector, supply constraint exacerbated demand, instigating more inflationary pressures.

“Given this backdrop, the emergency committee on food security set up by the President has been taking a number of measures and we see an end in sight to the persistent rise on food inflation.

“On our side at the CBN, we have responded with significant monetary policy tightening to reign in inflationary pressure.“Empirical analysis has established that money supply is one of the factors fueling the current inflationary pressure. 

“For instance, an analysis of the trend of the money supply spanning over nine months shows that M3 increased from N52.01 trillion in January 2023 to N68.25 trillion in November 2023 representing N16.24 trillion or 31.22 per cent increase over the period. 

“Increase in Net Foreign Asset (NFA) following the harmonisation of exchange rates and the N3.22 trillion ways and means advances were the major factors driving the increase in money supply.” Cardoso told the senators that the apex bank had decided to discontinue the ways and means regime. He added: “I am pleased to note the Fiscal Authorities efforts in discontinuing ways and means advances.  

“This is also in compliance with section (38) of the CBN Act (2007). The Bank is no longer at liberty to grant further ways and means advances to the Federal Government until the outstanding balance as of December 31, 2023, is fully settled. 

“The Bank must strictly adhere to the law limiting advances under ways and means to five per cent of the previous year’s revenue.

“We have also halted quasi-fiscal measures of over N10 trillion by the CBN under the guise of development finance interventions, which hitherto contributed to flooding excess naira and raising prices to the levels of inflation we are grappling with today.  

“The CBN’s 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.

“Our MPC meeting on February 26 and 27 is also expected to review the situation and take further decisions on these important issues.” Aside from 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 Kyari, also made presentations based on questions asked by the lawmakers. 

The Guardian

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