On the rainy morning of July 11, 2024, BusinessDay unfurled the 15th edition of its much-anticipated CEO Forum Nigeria. A grand confluence of over 200 CEOs, visionary leaders, and astute business executives defied the rain to participate.
This year’s gathering, resonating with the theme “Leadership in Tough Economic Times,” offered more than just a stage. It became a canvas of thought, stitched together by a distinguished array of speakers and spirited panel discussions.
Amid the buzz of elite networking, the forum transformed into a crucible of ideas, distilling wisdom and practical strategies for those daring to navigate the tempestuous seas of today’s business world.
Read also: Banks recapitalisation: Excluding retained earnings levelled playing field — Cardoso
One of the peak moments of the CEO Forum 2024 was the Fireside Chat with Olayemi Cardoso, governor of the Central Bank of Nigeria. Frank Aigbogun, publisher/CEO of BusinessDay, Nigeria’s leading national business news and financial daily newspaper anchored the chat.
The session started with a warm welcome by the facilitator, Aigbogun, who highlighted the importance of leadership in tough economic times, the theme of the Forum. The audience was then introduced to Cardoso, governor of the Central Bank of Nigeria.
This is the first of a three-part comprehensive publication reporting on the CEO Nigeria Forum 2024.
Setting the Context
The publisher of BusinessDay set the context by reflecting on the anticipation and positive expectations surrounding Cardoso’s appointment as the governor of the Central Bank of Nigeria.
He noted the commendation from the President, who referred to Cardoso as the “headmaster.” This led to the first question about the leadership qualities that contributed to his appointment and how they have served him in his role thus far.
Key Questions and Responses
Leadership Qualities
What leadership qualities brought you into the Central Bank of Nigeria as governor, and how have these qualities served you thus far?
“Thank you very much, Frank. First of all, before I respond to your question, I do want to commend you and your organisation, 2001 is when you started this enterprise. And you’re still running strong. We certainly need more like this in Nigeria. That’s the missing piece,” Cardoso started.
He emphasised his commitment as a policymaker to impact the average person on the street. He stressed the importance of making policies that genuinely benefit the public and highlighted the significance of listening to people’s problems and responding accordingly.
Collaboration with other entities, such as the Ministry of Finance and the Ministry of Trade and Industry, was underscored as essential.
Transparency and communication were also identified as critical elements, with initiatives like opening up discussions to the press after the Monetary Policy Committee (MPC) meetings.
Prioritising Foreign Exchange (FX) Backlog
Upon your arrival, how did you prioritise the huge backlog of foreign exchange (FX) payments, and what does it say about your leadership style?
The governor of the Central Bank of Nigeria stated that addressing the FX backlog was a priority even before he assumed office. He recognised the crisis and loss of confidence in Nigeria and emphasised the importance of maintaining integrity and credibility by honouring financial commitments.
“A good number of people came to me at the time and said, look, this doesn’t make sense.”
Despite pressures and temptations to divert funds to other equally pressing needs, he remained steadfast in his decision, believing it was crucial for the country’s long-term stability and trust.
Read also: Monetary policy rate hikes stabilised the economy — Cardoso
Volatility of the Naira
You mentioned that the Naira has seen the worst of its volatility. What exactly do you mean, and how much reassurance can you provide to our audience?
Nigeria’s apex bank’s boss explained that upon taking office, they identified many distortions in the system, such as illicit flows and non-compliance with rules. Addressing these issues led to initial volatility, but as stakeholders gained confidence in the new market operations and transparency, the volatility began to disappear.
He highlighted improved understanding and trust in the market as key factors in stabilising the currency.
“We believe that with time, stakeholders are becoming a lot more comfortable with the way the market is being run.”
Impact of Eased FX Requirements on Oil Companies
What has been the impact of easing FX requirements for oil companies in terms of supply and liquidity?
Cardoso acknowledged that it is a work in progress. Initial pushback was met with dialogue and reassurances, leading to a gradual improvement in contributions from the sector. He remained optimistic about the long-term benefits of this policy change.
Bank Recapitalisation and Retained Earnings
Regarding bank recapitalisation and the role of retained earnings, are you questioning the profitability levels declared by the banks?
Cardoso clarified that the Central Bank’s stance on not allowing retained earnings for recapitalisation is not a question of profitability but a matter of ensuring comparability and transparency. He emphasised that banks had ample time to prepare for recapitalisation and that the policy aims to build a stronger and more resilient banking system.
“We gave them a whole two years. And that’s not normal in the Nigerian circumstance when it comes to policy-making. Policies come out and they expect you to do it within six months, nine months, or immediately.”
Balancing Interest Rates and Economic Growth
How do you balance the need to cool down the economy with the need to promote growth?
Cardoso stressed that interest rates are set by the Monetary Policy Committee (MPC), which bases its decisions on data. The primary focus has been taming inflation, a necessary step given the significant money supply influx in recent years.
“We have a monetary policy committee policy comprising independent-minded thinking people. And these are people who are not giving to emotion. What they look at is data.”
He acknowledged the pain but emphasised that these measures are crucial for long-term stability. He also reassured that the MPC is not oblivious to the need for growth and aims to strike a balance.
Concluding Remarks and Future Outlook
“Two things I will say. First, if these hikes were not done at the time they were done, if you recall, the naira to dollar rate was almost tipping over. This helped to stabilise things. That’s number one. Second, very importantly, it’s a timing issue,” Cardoso said. “This is not something that I expect will remain with us forever. Fiscal issues being moderated and the ability to soak up all the excess liquidity in the system and balance things out over time are crucial.”
He continued “For example, between February and May of this year, the month-on-month inflation rate has halved, down by 50 per cent. This indicates that the right policies are being used and, in the not-too-distant future, interest rates will come down.”
Read also: Nigeria to double diaspora remittance inflow in one year Cardoso
Outlook for Nigeria
What is your outlook for Nigeria in 1 to 2 years? How do you see things panning out given the vast amount of data you see and the people you talk to?
Cardoso reflected on the theme of “building back better” and the importance of trust and good intentions. He emphasised the need for sincerity of purpose and the will to overcome huge challenges.
He stressed the importance of effective communication on both the monetary and fiscal sides to ensure that people understand the measures being taken. Highlighting the significant progress in reducing inflation and improving diaspora remittances, he expressed optimism about Nigeria’s future. Cardoso concluded by acknowledging the support and collaboration of various stakeholders, underscoring his belief in a bright future for Nigeria.
Data and Statistics
Naira Volatility
In 2023, the Naira experienced significant volatility, fluctuating between ₦700 and ₦950 per USD before stabilising around ₦820 per USD by mid-2024 due to improved market operations and transparency.
FX Backlog
Upon taking office, the FX backlog was approximately $7 billion. Prioritising the settlement of these payments helped restore confidence in Nigeria’s financial commitments.
Bank Recapitalisation
The Central Bank’s policy requires banks to increase their minimum capital base from ₦25 billion to ₦100 billion over two years, promoting a more resilient banking system.
Interest Rates
As of mid-2024, the Monetary Policy Rate (MPR) was set at 18 per cent, aimed at taming inflation, which stood at 22.50 per cent in May 2024.
Inflation
The month-on-month inflation rate halved between February and May 2024, reflecting the impact of the Central Bank’s policies.
Final Note
The session provided valuable insights into the governor’s leadership approach and the Central Bank’s strategies in these challenging times. The governor’s emphasis on transparency, communication, and collaboration was evident throughout the discussion, offering a hopeful outlook for Nigeria’s economic future.
