• Friday, January 31, 2025
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Cardoso ties naira’s now seven-month high stability to CBN reforms

Naira’s worst days are over— Cardoso

Olayemi Cardoso, Nigeria’s central bank governor has said the recent recovery of the naira could be tied to the various reforms implemented by the apex bank that’s made the local currency more competitive.

Cardoso, who spoke at the 2025 Monetary Policy Forum with the theme, ‘Managing the Disinflation Process’ in Abuja Thursday, said the CBN has continued to provide reforms to ensure price and currency stability in a bid to attract foreign investors as investors would be willing to invest in an environment where returns are attractive.

“We have seen relative stability in the foreign exchange market, a narrowing exchange rate disparity, and a rising external reserves of over $40 billion as of December 2024,” Cardoso said.

Though some of the reforms had significantly made the naira lose at least 70 percent of its value since foreign exchange rules were relaxed in 2023, it has now hit its highest level in seven months, reaching N1,485.95 per dollar on Thursday.

Read also: Naira hits seven-month high of N1,485.95 on CBN policies

This latest movement marks a return to that range, reflecting the impact of recent monetary and foreign exchange measures introduced by the CBN to stabilise the currency and improve market confidence.

This is as Cardoso stressed that Nigeria’s ability to attract inflows would depend on investor confidence in domestic reforms, macroeconomic stability, and positive real returns on investment.

He reiterated that the CBN’s transition from unorthodox to orthodox monetary policies was aimed at restoring confidence, strengthening policy credibility, and prioritising price stability.

The CBN chief noted that beyond monetary policy, the bank undertook critical reforms to strengthen the financial system and ensure macroeconomic stability.

He said the unified multiple exchange rate window was established to enhance efficiency in the FX market, stressing that the reform yielded tangible results with remittances through International Money Transfer Operators (IMTOS) rising 79.4 per cent in the first three quarters of 2024 to $4.18 billion, compared to $2.33 billion in the same period of 2023.

He said the bank also cleared a backlog of FX commitments totaling $7.0 billion, restoring market confidence and improving FX liquidity.

Read also: Cardoso’s first year sees naira rally amid stubborn inflation

Cardoso said the central bank also lifted restrictions on 41 items previously banned from access to the official FX market, a measure introduced in 2015, as well as introduced new minimum capital requirements for banks, effective by March 2026, to strengthen the resilience and global competitiveness of Nigeria’s banking sector, positioning it to support the ambition of a $1 trillion economy.

“These reforms reflect our commitment to creating an enabling environment for inclusive economic development. However, achieving macroeconomic stability requires sustained vigilance and a proactive monetary policy stance.”

Inflation could have reached 42.81 percent by December 2024

Cardoso also said without the decisive policy interventions undertaken by the bank to reign in rising prices, inflation could have reached 42.81 per cent by December 2024. This is against the 34.8 percent recorded in the period.

He noted that the liquidity injections associated with unorthodox monetary policies, particularly since the COVID-19 pandemic, had created a significant overhang, adding that while these measures were intended to cushion immediate shocks, they did not translate into commensurate productivity growth, fueling inflationary pressures and heightened foreign exchange volatility.

He said excess naira liquidity in the system had amplified demand-driven inflation, further exacerbated by supply-side constraints stemming from structural deficits.

Nonetheless, he said the country had turned a corner, pointing out that disinflation was within reach.

“However, we must remain committed to bold, coordinated policy measures to consolidate our progress”, adding that for inflation to be defeated, it required serious collaboration between the fiscal and monetary side.

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