Future of Nigeria’s economy bright, says CBN Gov Cardoso
CBN Governor, Olayemi Cardoso
Future of Nigeria’s economy bright, says CBN Gov Cardoso
Governor, Central Bank of Nigeria, CBN, Mr. Olayemi Cardoso yesterday said that the future of the country’s economy is bright citing the positive impact of recent reforms in the foreign exchange market and interest rate hikes including improved investors’ confidence, stability of the Naira and reduction in excess liquidity in the economy.
Speaking in Lagos yesterday during a fireside chat at the BusinessDay CEOs forum, Cardoso said that the recent interest rate hikes of the CBN were necessary to stabilise the naira and address the rise in money supply exacerbated by the N23 trillion Ways and Means, and N10 trillion intervention funds.
He however assured that interest rates will soon come down once the rising trend in inflation moderates.
Cardoso said: “The Monetary Policy Committee, MPC is not oblivious to the fact that ultimately we do want the economy to grow.
“The country does need growth. If these hikes were not done at the time they were done. If you recall, naira to dollar was almost tipping over. This helps to stabilise it. That’s number one.
“Number two, very importantly, is that it’s a timing issue. This is not something that I expect would remain with us forever.
Fiscal issues, are being moderated and the ability to soak up all the excess liquidity that we have in the system and be able to balance things out over some time. That’s the important thing for the MPC. I believe that for example, I can tell you that between February and May of this year, the month-on-month, MoM rate of inflation, has gone down 50%.
“As I said, this is not something that is one size fits all that I can expect, to continue like this. To the extent that the right policies are used, and obviously, with the results we’ve seen the right policies are being used. I believe that in the not too distant future, things will begin to modulate and interest rates will come down.”
Naira stability
Cardoso also assured that the naira will, going forward, experience more stability given elimination of distortions and stakeholders confidence in the new forex market regime.
He said: “When we came into the saddle of leadership at the Central Bank, we looked at the system and found that there was an awful lot of distortion within the system. For example, illicit flows, people not abiding by the rules.
“So we believe that quite a portion of volatility, the wild swings in the exchange rate was due to these malpractices.
We believe that with time, stakeholders are becoming a lot more comfortable with the way the market is being run now. There is no need to, for example, front load your forex request, you don’t need it. A lot of that is beginning to settle.
“Even with portfolio investors, we found that a good number of them came in, left and then came in again, because they were pretty comfortable that there was a plan and that the plan was headed in a direction that they could see, understand and trust. To my mind, a lot of them, you know, wild swings that we saw, are gradually beginning to smoothen out as a result of a better understanding of the market, the greater transparency that is taking place and the comfort that those who are using the market see in it.”
Stressing that the banking recapitalisation exercises aim to build a better stronger and more resilient banking system, Cardoso said that the exclusion of retained earnings from the computation of minimum capital requirements of banks was to ensure a fair standard of comparability.
He said: “What we are looking to do is build a better and stronger and more resilient banking system. And that is not something we want you to do overnight. You see, it’s important to note that the contribution that the banking system has towards our GDP is relatively modest in comparison to our peers. This we believe is a means of hopefully beginning to address that issue. Indeed, it will open the banks up to different kinds of wanting to provide different kinds of services to the populace as opposed to aggregating it in one particular area.
“With respect to retained earnings, quite frankly, as far as we’re concerned, it helps to build comparability because with other items, with retained earnings, easily, accounting rules allow you to calculate certain things and others take some certain things out from depreciation to amortization to a host of things. So we feel that something that is easily determinable outside of retained earnings does help for comparability. I think that is very important. And frankly for us, we have absolutely no doubt in our minds that we must move to a more transparent system within the banking industry, and this will contribute in no small way.”
Future of Nigeria’s economy bright, says CBN Gov Cardoso