The Governor of the Central Bank of Nigeria (CBN), Mr. Olayemi Cardoso, has said that the apex bank does not regret floating the currency as against calls to peg the naira at N1000 per dollar.
Cardoso said this during his speech at an event organized by members of the Harvard Club of Nigeria in Lagos.
The apex bank boss spoke on, “Leadership in Challenging Times: Restoring Credibility, Building Trust, and Containing Inflation.”
The floating of the naira has affected the CBN’s effort to ensure price stability as the country is a net importer of commodities, according to experts familiar with the matter.
But Cardoso said he understood upon assumption of duty that the credibility of the central bank had to be the bedrock of his actions.
He said, “Without credibility, no policy, however well-intentioned, can succeed. Floating the naira, a decision met with considerable public criticism, was necessary to bring the official exchange rate closer to market reality. The disparity between the official and parallel rates had encouraged arbitrage and speculation, eroding trust in the market.
“Credibility is earned by consistency. The decision to close this gap, while painful in the short term, sent a message to market participants that the CBN was committed to transparency and sound monetary policy.”
He said that speculative trading had been reduced, and stability was gradually returning to the currency markets.
The apex bank governor explained that the decision to implement the Electronic Foreign Exchange Matching System (EFEMS) for foreign exchange transactions at the Nigerian Autonomous Foreign Exchange Market was rooted in the understanding that trust is essential to central banking.
NewsNGR reported that the CBN instructed participants to migrate to the platform, which will take effect on December 1, 2024, after the November test run.
Cardoso said, “Trust is the currency of central banking. If the public loses trust in the institution, the efficacy of its policies diminishes. Our decision to implement the Electronic Foreign Exchange Matching System (EFEMS) is rooted in this understanding.
“By enhancing transparency and providing more accurate oversight of forex transactions, we send a strong signal that the CBN is serious about fair and efficient markets.
“In the face of economic challenges, it is imperative to focus on core objectives—restoring the credibility of the institution, building trust in the financial system, and, most critically, containing inflation. These are not just strategic goals; they are foundational to any meaningful recovery.”
He said the bank has also made efforts to reduce inflation. According to the National Bureau of Statistics (NBS), Nigeria’s inflation decelerated to 32.15 per cent for the month of August 2024 from 33.4 per cent recorded in July 2024.
Experts had argued that the easing was due to harvest season and not as a result of the impact of monetary tightening by the CBN.
But Cardos explained, “Our decision to raise the Monetary Policy Rate (MPR) to 27.25 per cent was a bold move. Higher interest rates, while painful for borrowers, are necessary to curb excess money in circulation and control inflation. Leadership is about making hard choices to secure long-term stability over short-term comfort in moments like these.
“Leading through challenging times means avoiding the temptation to take on too many initiatives. The central bank must focus on its core mandate—price stability. It is easy to become distracted by various political and economic pressures, but as a leader, one must prioritise.
“Effective communication is as important as the right policy. Clear and open communication fosters trust. From publishing the results of the Dutch Auction to ensuring regular updates on economic data, transparency has been our guiding principle. Trust is built on the belief that a central bank will take the necessary steps to ensure economic stability, even when those steps are uncomfortable or politically contentious.”