By: Emmanuel Ibitoye
The Governor of the Central Bank of Nigeria (CBN), Mr Yemi Cardoso, delivered positive insights on Nigeria’s economic outlook, stating that the country’s inflation rate is anticipated to drop from 28.92% to 21.4% in 2024. Addressing the House of Representatives in Abuja on Tuesday, Cardoso attributed this projected decline to the effective inflation-targeting policies implemented by the federal government.
He highlighted that improvements in agricultural productivity and alleviation of global supply chain pressures are contributing factors to this optimistic forecast. The CBN’s inflation-targeting framework, involving collaboration with fiscal authorities, aims to achieve price stability, potentially leading to lowered policy rates, increased investment, and job creation.
Cardoso acknowledged the challenges in the Nigerian foreign exchange market, emphasizing increased demand pressures affecting the value of the naira. Factors such as speculative forex demand, inadequate forex supply due to non-remittance of crude oil earnings, increased capital outflows, and excess liquidity from fiscal activities contribute to this situation.
In addressing exchange rate volatility, he outlined a comprehensive strategy, including unifying FX market segments, clearing outstanding FX obligations, introducing new operational mechanisms for Bureaux De Change (BDCs), enforcing the Net Open Position (NOP) limit, and adjusting the remunerable Standing Deposit Facility cap.
While acknowledging short-term volatilities attributed to arbitrage and speculation, Cardoso emphasized the shift to a market-driven exchange rate, intending to create a stable macroeconomic environment and discourage currency hoarding. He assured that the temporary costs associated with these measures would address fundamental issues in Nigeria’s macroeconomic landscape.
In conclusion, Cardoso emphasized that these measures, aimed at a more market-oriented mechanism for exchange rate determination, would boost foreign exchange inflows, stabilize the exchange rate, and minimize its pass-through to domestic inflation. The Governor expressed confidence that these initiatives would have a positive economic impact on the citizens.