Naira currently undervalued – Cardoso

..upbeat about FX inflows

Olayemi Cardoso Governor, Central Bank of Nigeria said on Wednesday that the naira -which has taken an appreciable hit in recent times – is undervalued at this point, as he vowed measures to quickly discover the actual price of the local currency.

“We believe that the naira is currently undervalued and, coupled with coordinated measures on the fiscal side, we will expedite genuine price discovery in the near term. This coordinated approach will contribute to a more balanced and stable exchange rate,” Cardoso stated at the Launch of the Nigerian Economic Summit Group (NESG) 2024 Macroeconomic Outlook Report.

Just on Tuesday, the naira slumped further to ₦1,372 per dollar at the black market and N878 at the official market at a time when money changers had pledged to make their transactions more transparent in line with ongoing government reforms.

The Economic Financial Crimes Commission (EFCC) recently gave the Association of Bureaux de Change Operators of Nigeria the nod to publicly post the buying and selling rates of the naira against the dollar online.

The development which experts hail as a positive move came a few months after Cardoso had announced in October plans to digitize the foreign exchange market in Africa’s largest economy.

At the outlook launch, Cardoso expressed optimism about the stabilisation of the FX market on the back of ongoing initiatives to pull in more dollars into the system and further expand the reserves which stood at about $33.34 billion as at last Monday.

“I am pleased to note our collaboration with the Ministry of Finance and the NNPCL to ensure that all FX inflows are returned to the Central Bank. This coordinated effort will greatly enhance the Bank’s FX flows and contribute to the accretion of reserves.

“The expected stability in the foreign exchange market for 2024 can be attributed to the reduction in petroleum product imports and the recent implementation of a market-determined exchange rate policy by the CBN,” he told participants at the hybrid launch.

This reform, according to him is designed to streamline and unify multiple exchange rates, fostering transparency and reducing opportunities for arbitrage.

The resulting consistent and stable exchange rate will not only boost investor confidence but also attract foreign investment, elevating Nigeria’s appeal to global investors,” the governor added.

He reiterated that the apex bank is implementing a comprehensive strategy to improve liquidity in the FX markets in the short, medium, and long term.

“Our focus is on addressing fundamental issues that have hindered the effective operation of our markets over the years.”

But Cardoso was quick to point out that upholding the integrity of financial markets is crucial for building confidence and achieving set targets, and that with the completion of an independent forensic review and the subsequent clearance of the backlog of
valid FX transactions, the authorities remain steadfast in their commitment to decisively address any infractions and abuses.

“In our efforts to stabilize the exchange rate, it is imperative that we prioritize transparency and create a market environment that enables the fair determination of exchange rates, ensuring stability for businesses and individuals alike,” he added.