The Central Bank of Nigeria (CBN) has disclosed that the worst is over for the Naira’s fluctuations.
CBN governor, Olayemi Cardoso, struck an optimistic tone regarding the naira’s stability in a recent interview with Bloomberg TV.
He expressed satisfaction with the progress made in curbing volatility and suggested the worst may be over for the Nigerian currency.
“We do believe that we have more or less seen the worst in terms of volatility,” Cardoso stated, underscoring his confidence in the measures implemented by the CBN.
He attributed this stabilization to several decisive actions taken by the central bank. He emphasized the Monetary Policy Committee’s (MPC) commitment to deploying all necessary measures to curb inflation and maintain currency stability.
The CBN governor also noted the importance of continuous monitoring and intervention in the market to ensure optimal performance.
“We are also very alive to observing the way and manner in which that market operates and ensuring that it gives the best value that can be accomplished using certain tools,” he added.
Cardoso’s optimism stems from the CBN’s multi-pronged approach to stabilizing the naira prior to the recent interventions, speculation and manipulation in the FX forward contract market were contributing to naira volatility.
The CBN took steps to address this by tightening regulations, increasing transparency, and potentially even intervening directly to smooth out imbalances by releasing FX belonging to foreign companies initially withheld.
Another significant move was the CBN’s decision to allow the naira to trade more freely, reflecting market forces.
This moves away from a fixed exchange rate system aimed to improve transparency and attract foreign investment.
The CBN also employed various monetary policy tools to influence the exchange rate.
This includes raising interest rates to make naira-denominated assets more attractive and curb inflation, which actually weakened the currency.
Though Cardoso did not explicitly mention it, the CBN also resorted to strategic interventions in the foreign exchange market by buying or selling naira to influence its value.
While acknowledging progress on the exchange rate, Governor Cardoso emphasized the CBN’s unwavering commitment to tackling inflation.
Nigeria’s high inflation rate of 33.95% (as of May 2024) continues to be a major concern.
The Monetary Policy Committee (MPC) will likely continue to use interest rate adjustments and other measures to bring inflation under control.
Governor Cardoso’s comments offer hope, but challenges remain.
The CBN will need to maintain a watchful eye on the foreign exchange market and inflation, potentially making further adjustments as needed.
External factors and domestic economic developments can always introduce new challenges.
The CBN’s continued efforts to maintain a stable exchange rate and control inflation will be crucial for a more prosperous future for the Nigerian economy.
