By Chinwendu Obienyi
The Governor, Central Bank of Nigeria (CBN), Olayemi Cardoso, has emphasised the bank’s commitment to intensified surveillance of the foreign exchange (FX) market as part of deeper efforts to curb inflation and stabilise the economy.
Cardoso also reiterated the need for stronger collaboration between fiscal and monetary authorities, particularly in managing budget financing, to ensure that fiscal deficits remain within sustainable limits.
Speaking at the recent Monetary Policy Committee (MPC) meeting held in Abuja, he stated that given the importance of the exchange rate in the fight against inflation and the sustenance of economic recovery and broader financial stability, the apex bank is intent on maintaining a heightened level of surveillance in the country’s foreign exchange market.
“We are looking at rooting out any bad actors and practices that threaten the smooth functioning of the market and the stability of the exchange rate. The Central Bank has an unwavering commitment to this objective,” Cardoso stated.
The Nigerian economy has remained resilient, and GDP growth was steady at 3.46 percent in the third quarter of 2024, with both the oil and non-oil sectors contributing to this growth.
Notably, oil production has risen to 1.54 million barrels per day, strengthening the current account balance and bolstering external reserves, which now stand at $38.36 billion.
Also, the rebasing exercise of the Consumer Price Index (CPI), conducted by the National Bureau of Statistics (NBS), has put the latest headline inflation figures at 23.18 percent, based on the new reference base year and the revised basket, which reflects current consumption patterns.
*”We cannot make any direct comparisons with the previous inflation numbers to infer a drop in aggregate prices. However, the supporting data and analysis presented to the MPC indicate a deceleration in the trend of inflation, which is expected to continue in 2025.
Improved productivity in agriculture and other targeted interventions from the fiscal authority are contributing to a decline in food prices. In addition, the stability of the exchange rate is expected to provide a positive anchor for inflation expectations,”* the apex bank’s helmsman noted.
He added that investor confidence is evidently high, and Nigeria’s competitiveness as a destination for foreign investment has resulted in increased capital flows through the economy.
These positive developments, he said, *”have provided us with a degree of comfort that our policy measures are contributing to the attainment of macroeconomic stability. However, we must remain vigilant and steadfast in our resolve, given that the environment remains fragile and gains recorded thus far could be easily reversed.
A review of the global economy indicates an elevated level of uncertainties, as geopolitical conflicts and divergences in trade policies of major countries threaten to hinder growth.”*
He stressed that the prospect of lower commodity prices and volatility in asset prices is of particular concern, given its impact on fiscal balances and the resilience of exchange rates in monolithic economies like Nigeria.
According to him, increased protectionism and disruptions to trade flows pose a risk to the outlook for global inflation, which may lead to a slower pace of policy rate easing.
*”A higher path of interest rates, especially across advanced economies, would thus impact capital flows to emerging markets and introduce some complexities in the strategies adopted for exchange rate management.
We, however, must not let our guard down, as we need to remain vigilant to avoid practices that risk taking us backward, especially around the management of budget financing, to ensure that the fiscal deficit stays within acceptable levels,”* Cardoso maintained.
On the decision of the MPC to maintain the status quo on interest rates, Cardoso said that easing rates on the back of observed deceleration in inflation appeared premature, given the fragility of the current environment and persisting risks on the horizon that may induce a reversal of all the gains recorded thus far.
He thereafter emphasized the need to observe more data points on the revised CPI numbers to allow for further interrogation of the expected behavior of prices in the rebased consumption basket, as well as validate staff inflation forecasts and model estimates.
*”Moreover, global uncertainties—including geopolitical risks and restrictive policies by major central banks—necessitate a cautious approach.
These considerations led me to align with the consensus of the Committee in maintaining all policy parameters unchanged—a prudent decision aimed at preserving stability and fostering long-term economic growth,”* Cardoso said.