Governor of the Central Bank of Nigeria (CBN), Olayemi Cardoso, has announced that inflationary pressures are starting to ease due to the central bank’s policy measures aimed at reducing the current inflation rate of 33.69%. He revealed that Nigeria recorded a total foreign exchange inflow of about $24 billion in the first quarter of 2024, a 50% increase compared to inflows in previous quarters up to 2021.
Cardoso also emphasized that the days of excessive naira volatility are over, attributing the stability to the monetary policy tools employed by the CBN to address challenges in the forex market. During an interview with Bloomberg TV on Tuesday in London, Cardoso stressed the Monetary Policy Committee’s (MPC) commitment to tackling inflation, which they see as a major impediment to Nigeria’s future.
Despite the positive projections, an analyst criticized the assessment, arguing that it should reflect the economic situation and inflationary pressures faced by the average Nigerian.
Since taking office in September 2023, Cardoso has implemented several steps to restore orthodox monetary policy, confront inflation, attract foreign inflows, and stabilize the currency. This year, interest rates have been raised by 750 basis points to 26.25%, a foreign exchange backlog of $7 billion has been cleared, and exchange rate policies have been revamped with new guidelines.
The naira has stabilized this month, trading between N1,473 and N1,490 according to data from the FMDQ securities exchange. However, concerns remain among Nigerians as the policies have not led to a reduction in the prices of basic commodities despite widespread hunger.
Cardoso noted a deceleration in month-on-month inflation rates as a positive development, assuring that the MPC remains vigilant in monitoring inflation trends. He said, “The MPC has been very clear in stating that they see inflation as a major impediment to the future of Nigeria and would do everything possible to ensure that they keep inflation in check and bring it down as reasonably as they can. I don’t see that changing. So far from what we’re seeing, there’s a deceleration in inflation rates, which is good news. And my intuition is that with the measures that have been taken in the recent past, and with the confidence of the MPC members to watch the interest rate trajectory very closely, we should see a continuation of the moderation in the inflation rate.”
Cardoso refused to speculate whether this marks the end of the tightening cycle that began in May 2022, stating that the MPC’s decisions will be data-driven. He added, “Data will direct whether they see further hikes or not. The MPC has been very clear in stating that they see inflation as a major impediment to the future of Nigeria, and they will do everything possible to ensure that they keep inflation in check and bring it down as reasonably as they can and I don’t see that changing.”
On the exchange market’s relative stability, Cardoso expressed satisfaction with the progress in stabilizing the naira and pledged to continue measures to drive down rates, adding that the worst of naira fluctuations is over. He credited the CBN’s multi-pronged approach to stabilizing the naira for this improvement.
He explained, “We do believe that we have more or less seen the worst in terms of volatility. You recall that months ago when I assumed office in September of 2023, we did have a crisis on our hands and the naira was, you know, headed in a direction that everybody didn’t like. There was a lot of fear, panic, loss of confidence, and trust. And it was vitally important that we addressed those issues of confidence and trust. We are relatively pleased with how far we have gotten up to now. In the past two, or three weeks, after a period of volatility, we have seen a lot of stability in the market and there has hardly been any movement in the currency.”
Cardoso highlighted that the first quarter of 2024 saw a total inflow of about $24 billion, almost 50% more than in previous quarters up to 2021. He noted that the rise in FX liquidity is the highest since 2021, indicating the positive impact of the CBN’s measures.
In April, Nigeria recorded a total foreign portfolio inflow of N93.37 billion against a foreign outflow of N119.81 billion, marking a 415% increase compared to the same period in 2023. The country’s foreign reserves surged to their highest in three months in June, standing at $33.58 billion as of June 19, 2024.
Cardoso also mentioned a committee set up to facilitate more inflow of diaspora funds into the official FX market, which has already yielded positive outcomes with increased inflows from Nigerians in the diaspora.
Despite the positive outlook, Professor Segun Ajibola of Babcock University argued that the CBN’s policies, though commendable, have not yet resolved the problems faced by the average Nigerian. He emphasized that improvements in quality of life, affordability of necessities, and economic stability should be evident to the average citizen.
Ajibola added, “You know when those in positions of responsibility talk, it is assumed that they have the data and can serve information received and can make educated guesses into the future based on the facts available to them. However, the taste of the pudding is in the eating, it is the end that would justify the means. Let the man on the street see the improvement that we are talking about. Let him say food is now cheaper than before. He can heave a sigh of relief that things are improving and that the quality of life he is living is gradually retiring to normal.”
Meanwhile, the CBN has permitted eligible International Money Transfer Operators to sell foreign exchange on Nigeria’s official window. This directive, effective immediately, aims to ensure greater remittance flows through formal channels and improve the efficiency of the foreign exchange market.
