Governor of the Central Bank of Nigeria (CBN), Olayemi Cardoso, expressed confidence in the country’s economic outlook, citing the positive impacts of recent reforms in the foreign exchange market and interest rate adjustments.
During a fireside chat at the BusinessDay CEOs Forum in Lagos on Thursday, Cardoso highlighted improved investor confidence, naira stability, and reduced excess liquidity as key outcomes of these reforms.
Cardoso noted that the recent interest rate hikes were crucial for stabilizing the naira and addressing the surge in money supply caused by significant government interventions.
He assured that interest rates would eventually decrease as inflation trends moderate.
“The Monetary Policy Committee (MPC) is not oblivious to the fact that ultimately we do want the economy to grow,” Cardoso stated.
“The country does need growth. If these hikes were not done at the time they were done. If you recall, naira to dollar was almost tipping over. This helps to stabilise it.”
He continued, “This is not something that I expect would remain with us forever… I believe that in the not too distant future, things will begin to modulate and interest rates will come down.”
The CBN Governor also emphasized the elimination of market distortions and increased stakeholder confidence as factors contributing to the naira’s stability. He noted that illicit financial flows and rule violations had previously caused significant volatility.
“When we came into the saddle of leadership at the Central Bank, we looked at the system and found that there was an awful lot of distortion within the system,” Cardoso explained.
“For example, illicit flows, people not abiding by the rules. So we believe that quite a portion of volatility, the wild swings in the exchange rate was due to these malpractices.”
Cardoso also discussed the ongoing banking recapitalization efforts aimed at creating a stronger, more resilient banking system.
He explained that excluding retained earnings from the minimum capital requirements ensures fair comparability and transparency within the industry.
“What we are looking to do is build a better and stronger and more resilient banking system. And that is not something we want you to do overnight,” he said.
“With respect to retained earnings, quite frankly, as far as we’re concerned, it helps to build comparability… So we feel that something that is easily determinable outside of retained earnings does help for comparability. I think that is very important.”
Cardoso concluded by expressing his unwavering belief in the positive direction of Nigeria’s economic policies and the anticipated benefits for the nation’s growth and stability.