CBN Governor Yemi Cardoso Announces Shift to Strategic Planning for Forex Stability

CBN shifts focus from 'firefighting' to strategic planning for forex stability, aims to double remittance flows and boost investor confidence in Nigeria's economy.

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CBN Governor Yemi Cardoso Announces Shift to Strategic Planning for Forex Stability

CBN Governor Yemi Cardoso Announces Shift to Strategic Planning for Forex Stability

At the IMF Spring Meeting 2024, Central Bank of Nigeria (CBN) Governor Yemi Cardoso announced a notable change in the bank's approach from 'firefighting' to strategic planning for foreign exchange stability. Cardoso emphasized the importance of ease of doing business and financial inclusion initiatives to support this transition.

The CBN governor highlighted the evolution of Nigeria's foreign exchange market, influenced by factors like international trade patterns, institutional changes, and structural shifts in production. Prior to the establishment of the CBN and the Exchange Control Act of 1962, foreign exchange transactions were largely unregulated.

Cardoso stated that the CBN has formed a dedicated group to address hindrances to foreign exchange inflows and double remittance flows through formal channels in the short to medium term. "The task force aims to address any bottlenecks hindering formal remittance flows, as Nigeria relies heavily on remittance inflows to boost dollar supplies, which average around $20.5 billion according to the World Bank," he said.

Foreign exchange inflows to Nigeria rose to $2.3 billion in February 2024, driven by renewed interest from foreign investors and a rise in overseas remittances. Personal remittances received in Nigeria increased by $0.7 billion (3.59%) in 2022, reaching a total of $20.13 billion.

Why this matters: The CBN's shift to strategic planning for forex stability has significant implications for Nigeria's economy. A more stable and predictable foreign exchange market can boost investor confidence, facilitate international trade, and support economic growth. The focus on ease of doing business and financial inclusion initiatives can also help create a more conducive environment for businesses and individuals to thrive.

Cardoso acknowledged the persistent challenges of elevated inflation and security concerns but expressed confidence in the CBN's determined pathway and sequenced approach to tackling these issues, in collaboration with key stakeholders. The CBN is also exploring ways to leverage technology and remote banking to reduce the cost of transactions and expand access to the financial system.

The naira has emerged as the top-performing currency worldwide in April 2024, supported by bullish sentiment from leading international investment institutions. Cardoso stated, "The naira has been declared the best performing currency globally as of April 2024, and Vice President Kashim Shettima expressed optimism that the naira will appreciate further as the dollar continues to crash."

The CBN's collaboration with International Money Transfer Operators (IMTOs) to double remittance inflows into Nigeria is another key initiative highlighted by Cardoso. The central bank has secured the cooperation of some IMTOs to achieve this goal, which is expected to boost dollar supplies and support the naira's stability.

Key Takeaways

  • CBN shifts focus from 'firefighting' to strategic planning for forex stability.
  • CBN forms task force to address bottlenecks hindering formal remittance flows.
  • Nigeria's forex inflows rose to $2.3B in Feb 2024, driven by foreign investment and remittances.
  • Naira emerges as top-performing currency globally in April 2024, supported by bullish sentiment.
  • CBN partners with IMTOs to double remittance inflows, boosting dollar supplies and naira stability.