Newly confirmed Governor of the Central Bank Mr. Yemi Cardoso has outlined how the CBN plans to stabilize the foreign exchange market in the short term.
Dr. Cardoso stated this plan while appearing before the Senate for confirmation of his appointment.
Commenting on questions concerning the stabilization of the naira, he noted that there are long-term, long-term, and short-term measures.
On the short-term measures, he said the CBN will hope to clear the backlog of unsettled FX obligations.
He said,
- “The more immediate is what we need to look at and I sense there are two issues that we would have to address when and if we are nominated by this hallowed chamber.”
- “Number one- it is that of which I’ll term an operational issue. Right now, we have a situation where we are aware there are unsettled obligations of the central bank whether it is $4bn, $5bn, $7bn, I don’t know.”
- “But definitely, the immediate priority will be to verify the authenticity and extent of the unsettled obligation and once we do that, we need to look for a way to take care of it.
- It would be naive for us to think we will be able to make progress if we don’t handle that side of the foreign exchange”
Ensuring transparency in the CBN
He said the second step of his plan to address the foreign exchange problem is more system-related and bothers to ensure there is transparency and adherence to rules that both investors and regulators understand
In his words.
- “We cannot reasonably expect serious foreign investors, portfolio investors, and foreign direct investors who generally have an impact on your market will come if you do not have an open and transparent system that everyone understands and can rely on and is not subject to review without notice.”
He further emphasized that in setting up guidelines that players in the FX markets will adhere to, the relevant stakeholders will be carried along.
He said getting stakeholders together to hear views and opinions will form the major objective of the new apex bank’s management.
Inflation
He said there are longer and medium-term measures meant to combat this problem. Some of the long-term measures he outlined include President Tinubu’s removal of subsidies and the tightening of fiscal measures and loopholes.
For the short-term measures, he said the various subsets of inflation were caused by supply issues and if the government can ramp up supply, these issues will be addressed.
He alluded to food inflation which he judged to be caused by supply problems and hopes those on the fiscal side can address it.
He said thus,
- “The jury is out as to what the real components of inflation are. Let us say it is a combination of structure and supply.
- If we say food inflation, and what we need to do is to ramp up production of food and that is the effort that the fiscal side will tackle, and we will collaborate with them.”
Speaking further, he noted that energy inflation is caused by the importation of goods with energy components which translates to the importation of inflation.
He promised that the new CBN team would work closely with the fiscal side to ensure they ramp up the local supply of energy.