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The newly appointed Governor of the Central Bank of Nigeria, Olayemi Cardoso, has expressed his commitment to prioritizing the resolution of the central bank’s outstanding foreign exchange obligations in the short term. He made this statement during a Senate screening session on Tuesday.

Cardoso pledged to improve transparency, address corporate governance issues, and restore confidence in the autonomy and integrity of the central bank. He emphasized the need to promptly address the backlog of unsettled foreign exchange obligations, recognizing its importance for progress in the foreign exchange market.

The new CBN governor also outlined his intentions to maintain price stability, shift towards evidence-based monetary policies, and discontinue unconventional monetary policies previously implemented by his predecessor in order to strengthen the country’s currency, the naira.

Cardoso’s confirmation comes at a challenging economic period, with the naira’s value approaching 1,000 naira per US dollar in the parallel market. The official exchange rate closed at N755.08/$1 on Tuesday, according to data from the FMDQ Exchange.

Addressing the naira’s stabilization, Cardoso emphasized the importance of the central bank settling existing financial obligations and establishing transparent rules. He emphasized the need to verify the authenticity and extent of the owed amounts and to create open and transparent guidelines that all market participants, including foreign and portfolio investors, can understand and trust.

Cardoso’s approach aims to ease restrictions on investors and create a more inviting environment for foreign investment. He also mentioned the importance of engaging relevant stakeholders and seeking input in the process.

It’s worth noting that the immediate past acting CBN Governor, Folashodun Shonubi, had previously announced the conclusion of negotiations on dollar debts with commercial banks and the commitment to clear all forex exchange backlogs within one to two weeks. However, as reported earlier, the clearing process had not been completed by the central bank despite the initial promise.

Furthermore, Cardoso expressed his intention to combat inflation through evidence-based policies, indicating a focus on data-driven measures to address this economic challenge.
He explained, “In addressing the challenge of inflation, we are committed to implementing evidence-based monetary policies. Our decisions will not be arbitrary but grounded in solid data. We will place a strong emphasis on bolstering our data collection capabilities to make informed decisions.”

In August 2023, Nigeria’s inflation rate surged to 25.80 percent, marking a 1.72 percentage point increase from the previous month’s rate of 24.08 percent.

The Central Bank of Nigeria (CBN) initiated a tightening cycle in its monetary policy in May 2022, raising its benchmark interest rate from 11.5 percent to 18.75 percent in July of the same year. This move was justified by the CBN due to the rising rate of headline inflation.

However, the central bank has struggled to effectively control the increasing inflation.

Cardoso went on to explain that reliable studies have shown that over the past decade to 15 years, at least 50 percent of inflation has been attributed to factors such as money supply and deficit financing. He identified this as a significant and persistent issue that needs to be confronted.

He further assured that the CBN, under his leadership, would work to ensure that deficit financing does not pose a problem for the country, thereby addressing issues related to money supply.

Intervention suspension
During his screening process, Cardoso stressed the importance of restoring the Central Bank of Nigeria’s (CBN) independence and credibility by refocusing on its core mandate and fostering a culture of compliance.

He remarked, “There has been considerable attention given to the past involvement of the CBN in development financing, to the extent that the boundaries between monetary policy and fiscal interventions have become blurred.”

“In reorienting the CBN towards its primary mandate, it is necessary to transition the CBN away from direct involvement in development finance interventions and toward a more limited role focused on providing advisory support for economic growth.”

As of October of the previous year, approximately N9 trillion had been disbursed as intervention funds by the central bank. The CBN reported that about N3.7 trillion had been repaid by beneficiaries, while over N5 trillion was still pending recovery.

Regarding burdensome bank charges, Cardoso mentioned that the team would review the situation and formulate the necessary stance on this matter.

No political influence
The newly appointed governor also made a commitment that he and his team would not be swayed or controlled by politicians while carrying out their responsibilities.

During the screening process, Senate President Godswill Akpabio inquired whether Cardoso would be susceptible to political influence once in office.

In response, the CBN governor asserted, “It’s crucial for those of us being considered for this position today to recognize that this is a position of trust. With that trust comes significant responsibility to uphold it.”

“I understand that a great deal of time and effort has gone into selecting the individuals who stand here as nominees today. As far as I’m concerned, under my leadership, we will not be subject to manipulation by anyone. The goal is to ensure that we do what is right, when it is right, and in the right way. We have witnessed the consequences of not doing what is right, and we do not intend for that to recur.”

He further emphasized that his team and himself would instill a culture of compliance within the central bank by strictly adhering to the CBN Act of 2007, stating, “I believe that during our tenure, the central bank will have no option but to adopt a culture of compliance.”

Senators’ advice
On Tuesday, following an extensive screening process, the Senate confirmed Olayemi Cardoso as the substantive Governor of the Central Bank of Nigeria, along with four Deputy Governors. The Deputy Governor nominees include Emem Nnana Usoro, Muhammad Sani Abdullahi Dattijo, Philip Ikeazor, and Bala Bello.

During the screening, lawmakers expressed concerns about the country’s economic challenges, particularly the state of the Naira. They also questioned the Central Bank’s involvement in sectors beyond the mandate of the Central Bank Act, 2017.

Senate President Godswill Akpabio highlighted the importance of having an apex bank focused on providing sound monetary policy and directions for the economy. He expressed regret that the former board of the central bank had lost its focus and ventured into politics with public funds.

Akpabio raised concerns about the rapid change of the Naira’s design within 11 days during a previous election, emphasizing the need for a more stable currency exchange rate against the Dollar.

Senator Olalere Oyewumi inquired about the concurrent use of old and new Naira notes, seeking clarity on the matter. Cardoso addressed the issue of the Supreme Court’s ruling that old N1,000, N500, and N200 notes would cease to be legal tender by December 31, 2023, and Oyewumi sought Cardoso’s stance on continuing the dual currency system.

Senator Abdul’Aziz Yari questioned whether the CBN was legally empowered to generate profits, while Senate President Godswill Akpabio inquired about the use of those profits and whether they were directed to the Federal Government’s Consolidated Revenue Account.

Former Edo Governor, Adams Oshiomole, advocated for government intervention to stabilize the Naira, citing concerns about high-interest rates impacting the manufacturing sector. He emphasized the need for innovative approaches to address economic challenges and cautioned against uncritically adopting Western economic models.

Oshiomole expressed confidence in the new CBN leadership and their potential contributions to fulfilling government campaign promises. He called for tailored solutions to Nigeria’s unique challenges rather than blindly adopting international economic models.

With the official confirmation of Cardoso and the new Deputy Governors by the Senate, the Central Bank of Nigeria is now expected to convene its monetary policy committee meeting. It’s worth noting that the CBN had previously postponed its 293rd MPC meeting, originally scheduled for September 25 and 26, 2023.

Anchor borrowers, others

Olayemi Cardoso, the newly confirmed Governor of the Central Bank of Nigeria, has emphasized the need to refocus the apex bank’s priorities by moving away from direct development finance interventions. He suggests that the Central Bank should shift towards a more limited advisory role that supports economic growth rather than actively financing projects.

In the past, the Central Bank of Nigeria has been involved in financing growth-enhancing programs and projects of the Federal Government, often straying from its core mandates. While these interventions have been aimed at accelerating economic growth, Cardoso believes that the central bank should return to its primary responsibilities.

Cardoso envisions a refocused Central Bank that primarily provides monetary policy interventions and advisory roles that align with the government’s fiscal proposals. These advisory roles include acting as a catalyst for specialized institutions and financial products, facilitating new regulatory frameworks, and promoting financial inclusion.

He acknowledges that challenges exist within the central bank, including issues related to corporate governance and institutional autonomy. Cardoso is keen on restoring stakeholders’ confidence in the autonomy and integrity of the Central Bank.

He also addresses concerns related to inflation and price stability, recognizing that a significant portion of inflation is attributed to money supply and deficit financing. Cardoso aims to work closely with stakeholders to ensure that deficit financing is managed effectively.

Regarding the foreign exchange market, Cardoso emphasizes the need for access and price discovery mechanisms. He questions the role of the Central Bank in the foreign exchange market and the potential need for interest rate realignment.

In conclusion, Cardoso commits to adhering strictly to the CBN ACT of 2007 and assures the Senate of regular reviews and consultations in his new role as Governor of the Central Bank of Nigeria.