Despite daunting challenges ahead of him, the new Governor of the Central Bank of Nigeria (CBN), Dr. Olayemi Michael Cardoso, has assured he would use short, medium and long term measures to deliver on his mandate. DAVID AGBA and AMAKA IFEAKANDU report.
The Senate recently confirmed Dr. Olayemi Cardoso as Governor of the Central Bank of Nigeria (CBN) haven been nominated by President Bola Tinubu along with four deputies for the positions on 15 September.
The deputy governors confirmed are Emem Usoro, Muhammed Abdullahi-Dattijo, Philip Ikeazor and Bala Bello.
The request of Mr Tinubu seeking for the confirmation of the nominees was read by the senate president at the plenary earlier and it was passed to the senate committee of the whole for immediate consideration.
Three-pronged approach
Mr Cardoso, while responding to questions, after the screening said his major goal is to refocus the CBN through his short, medium and long term measures.
He assured that the bank under his watch will operate transparent monetary policies with respect to data.
The CBN governor also stressed that his administration will not tolerate the errors made by past administrations of the bank.
Ensuring international standard
Mr Cardoso promised that the CBN under his watch will comply with all constitutional duties and ensure that financial policies of the country are of international standard.
There has been comments on what the new apex bank boss should do as to taming the country’s rising inflation, addressing the issue of forex scarcity and tackling Nigeria’s rising debt.
These are some of the key issues on the front burner for central bank governor to speedily address in order to ease the challenges which currently bedevil country, especially the real sector of the economy.
The Director-General of the Manufacturers Association of Nigeria, Segun Ajayi-Kadir described the period between the exit of Governor Emefiele and the appointment of Governor Cardoso as a period of uncertainty and anxiety.
Many expectations
Ajayi-Kadir said that the association is expectant that the change would create an atmosphere that is conducive for the promised reform in the financial sector of the economy.
He said, “There is also the issue of current unimpressive forex reserves; high inflation rate; low possibility of raising market rates to more attractive levels; high debt profile and increasing debt servicing costs and public aversion to more borrowing.
“Better attempts should be made to ensure a strategic balance between tackling inflation and engendering economic growth through effective funding. So, promoting long-term macroeconomic management under this scenario is a task that has the CBN Governor located right in the middle.”
Ajayi-Kadir further said there is a need for the country’s fiscal policies and monetary policies to be in sync. He added that manufacturers expect that the new Governor will actively support this policy handshake as this was lacking in the last administration.
Floating of the exchange rate
On the matters arising from the recent floating of the exchange rate, he stressed that manufacturers require forex to import their raw materials, machines and spare that are not locally available, and therefore look forward to a more supportive dispensation.
He said, “One thing that is also important is for the CBN Governor to pay close attention to the dynamics of our economic environment and engage critical stakeholders ahead of monetary policy incubation as well as evaluation and monitoring.
“I recall that we severally sought to meet with the former CBN Governor to express our concerns over the BDCs management of the forex disbursements but we never got a chance, neither did we get any responses to the fact-based submissions we made on manufacturers’ forex application and receipts.”
Need to stabilise nation’s currency
Also, the former Managing Director H J Trust and Investment, Mr Harrison Owoh while listing things needed to be done by Cardoso, said to stabilises nation’s currency, he said there are many methods of exchange rates any of which the government might desire to implement against its benefits.
He said we have fixed, floating, and managed rates, saying that the fixed rate which also known as government own sovereign right is a system wherein the government fixed the rate in which its desires its currency to exchange with other currency of the world.
He said with this method the government has all to say on the market forces of demand and supply. He said the floating rate as it implied means that the movement of rates up and down are determined by market forces of demand and supply mechanism.
Demand and supply
He said if the demand is higher the rate goes up and if the demand is low the rate comes down and it does not involved government intervention just market forces while under Managed exchange rate system, the government comes in as an intervention force. He stated that under managed exchange rate mechanism, If the rate is too high the government pumps in more foreign currencies in the market to bring down and stabilises the rates and If there are excess money in the market the government buys more currency for itself from the market thereby forcing the market to an equilibrium state.
He, however, pointed out that the government is the determining force, of exchange rate, adding that currency are normal priced by the economic resources and productive capacity of a country.
In his explanation, he said “the country that produces and export more backed products by their economy resources have their currency valued higher.
He said Nigeria with her natural resources is a consumption nation and as we import almost everything and our resources are badly managed.
He said as a result of this we became prey to financial institution who dictates to us how to manage our economy.
Need to halt exchange rate depreciation
Speaking further he said “Our exchange rate depreciation will only stop if we produce goods to be exported to the world and stop important of finished goods.
“Secondly, where we manage and have effective utilisation of our earned foreign exchange the depreciation aspect of our currency will stop.
“Presently Nigeria has a multiple exchange rate, that is the government flotation spot rate and the black market plus the BDC rate. Each segment buy and sale at will. The coordination of this rate is the effect of the constant depreciation of the naira. The black market operator’s competing against themselves to buy at the highest rate possible to attract customers.”
He said each higher rate bought alters the previously rate, indicating that we are in a competition that damage the economy hence the currency depreciate.
He pointed out that the introduction of floating exchange rate in the Nigeria forex market helps kills the local currency the naira, adding that Nigeria do not have the economic power or mechanism to float her exchange rate.
He said when we produce and export more of the local goods and services, the value of our currency will increase hence a better rates for our naira
Producing what we consume
He said only way for the country to move forward is to produce what we consume, import only essential goods, produce and export to other part of the world, manage effectively our earned foreign currency.
He explained that the role of BDC in the foreign exchange market is that of distribution, adding that BDC does not earn foreign currency, they only buy foreign currency from the market segment and sale to market segment.
Owoh insisted that stabilisation of forex comes only when they distribute to these segment that requires small needs of currency making the purchase and sale of foreign currency easier to the public.
He said direct sale of forex to BDCs will helps to decongest the banks so that buyers can go to other safe sale outlet such as the BDC to buy their currency instead of concentrating only in the banks.