The Central Bank of Nigeria (CBN) has attributed the recent volatility in the foreign exchange market to “seasonal demands,” a statement that may raise eyebrows given the naira’s dramatic fluctuations over the past year.
Governor Olayemi Cardoso made the remarks during the 295th Monetary Policy Committee (MPC) meeting on Tuesday, where the benchmark interest rate was raised from 24.75% to 26.25%.
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“The recent volatility in the foreign exchange market is a reflection of seasonal demand, a natural interplay between supply and demand in a free market system,” Cardoso explained. However, this explanation may not fully address the naira’s tumultuous journey.
Since President Bola Tinubu took office in May 2023, the naira has seen unprecedented swings. Trading at around N700/$1 a year ago, it plunged to a record low of N1,900/$1 in February 2024. A brief rally in April brought it to N1,100/$1, but May has seen a renewed decline to N1,600/$1.
Despite the volatility, Cardoso expressed optimism. “There is light at the end of the tunnel,” he asserted, maintaining that “the tools the CBN is using are working and we are beginning to get some relief.” He pointed to a marginal increase in Nigeria’s external reserves between March and April 2024.
Dr Olayemi Cardoso,CBN, Governor
The MPC also acknowledged the importance of foreign inflows, which currently represent about 6% of Nigeria’s GDP. Cardoso revealed plans to “double remittance flow within the year” through targeted engagement efforts. The CBN is also prepared to adopt “tighter regulation and technology” if necessary.
In a move aimed at boosting formal remittance channels, the CBN recently approved 14 International Money Transfer Operators (IMTOs). Cardoso commended their response to pricing concerns, urging them to “use official channels to advance the course of enhancing foreign currency inflows.”
The MPC meeting concluded with a reassurance that the Nigerian banking system remains sound despite current economic headwinds. The coming months will be crucial to see if the CBN’s measures can stabilize the naira and deliver on Cardoso’s promise of a brighter future.
New Mail
