The Central Bank of Nigeria’s Monetary Chess Challenge: A Closer Look at Recent Policy Moves
The Central Bank of Nigeria (CBN) has recently made significant policy moves in the foreign exchange market, under the leadership of Dr. Yemi Cardoso. Since assuming office as the new Governor of the CBN in September 2023, Cardoso has been working towards stabilizing the economy amidst various challenges.
In his first monetary policy speech in November 2023, Cardoso highlighted the decline in crude oil production, increased public expenditures, insecurity issues, and the impact of fuel subsidy removal on the economy. He emphasized the need for price stability and exchange rate stabilization to promote economic stability.
To address the volatility and lack of liquidity in the foreign exchange market, the CBN issued several circulars in late January 2024. The first circular focused on transparent pricing in foreign exchange transactions to prevent under-reporting of rates by dealers. This was followed by a directive to banks to sell excess foreign currency holdings to customers, leading to increased liquidity in the market.
The CBN’s third circular targeted International Money Transfer Operators (IMTOs) by removing the allowable limit on exchange rates, aiming to draw more diaspora remittances into the official foreign exchange market. These policy moves are part of Cardoso’s strategy to improve the functioning of the foreign exchange market and boost dollar liquidity.
Industry watchers are eagerly anticipating the upcoming MPC meeting on February 26-27, where Cardoso is expected to make further policy decisions. The ongoing battle between the Naira and the Dollar in the foreign exchange market reflects the CBN’s commitment to achieving economic stability under Cardoso’s leadership.
Overall, the recent policy moves by the CBN signal a proactive approach to addressing economic challenges and restoring confidence in the foreign exchange market. With Cardoso at the helm, the CBN is taking bold steps to navigate the complexities of Nigeria’s economy and ensure sustainable growth.