The Governor of the Central Bank of Nigeria (CBN), Olayemi Cardoso, asserted that the value of the naira has shown remarkable stability since June 2024, despite challenges in the global and domestic economic landscapes.
Speaking after the 298th meeting of the CBN’s Monetary Policy Committee (MPC) in Abuja on Tuesday, Cardoso emphasized that the central bank’s efforts to manage the currency and stabilize prices have begun to yield positive results.
During the briefing, Cardoso acknowledged the importance of addressing both the value and stability of the naira, drawing a distinction between the two concepts. While the value of a currency is subject to various macroeconomic factors, the CBN’s primary goal is to ensure its stability, which is vital for economic planning and growth.
Stability over value
Cardoso explained that the focus of the CBN has always been on maintaining the stability of the naira, which he described as essential for fostering an environment conducive to economic planning and investment.
He said: “The Central Bank of Nigeria is there to provide stability. Stability helps you to plan. We do all we can with all the tools available and there are multiple tools including sanctioning those with bad behavior, a whole host of different things to ensure their stability. Now if you look and measure stability between June and now, you find out it has been stable. It has been stable. The currency has been stable.”
According to the CBN governor, since June 2024, the naira has remained stable, despite some pressure points from both domestic inflationary trends and global economic uncertainties. This period of stability, Cardoso noted, is a direct result of deliberate policies aimed at reducing currency volatility and creating a more predictable economic environment.
The CBN governor pointed out that while the central bank cannot control the fundamental drivers of the currency’s value, such as supply and demand dynamics, fiscal deficits, and the country’s balance of payments, it can effectively manage the volatility around these factors.
Policy interventions and economic fundamentals
The central bank’s approach to managing the naira’s stability, according to Cardoso, has involved a combination of interventions and strategic policy measures.
These include addressing the supply-side bottlenecks that previously hindered the flow of foreign exchange into the country, such as challenges in diaspora remittances and foreign capital inflows.
Cardoso highlighted that the CBN had made significant strides in improving these channels, resulting in a steady increase in reserves.
- He also explained that Nigeria’s foreign exchange reserves had improved significantly, which he attributed to the CBN’s policies.
- Despite these improvements, Cardoso stressed that reserves are not just a buffer against economic shocks but are critical for defending the economy in times of unforeseen crises, such as the COVID-19 pandemic, which was an unprecedented global shock.
However, while the central bank can manage currency volatility, Cardoso cautioned that it cannot control the underlying economic fundamentals that dictate a currency’s true value. Factors such as Nigeria’s balance of payments, fiscal policies, and the nation’s reliance on imported goods all play a significant role in determining the strength of the naira.
The case for import substitution
- In this context, Cardoso urged Nigerians to support policies aimed at reducing the country’s reliance on imports. He suggested that Nigerians should prioritize locally made goods over foreign products as part of efforts to strengthen the naira.
- The CBN Governor expressed optimism that the country’s ongoing efforts to diversify its economy, particularly through import substitution and trade policies that promote domestic production, would help reduce dependence on foreign goods.
- This, in turn, could lessen the pressure on the foreign exchange market and contribute to the stability of the naira.
