‘We Don’t Have Magic Wand To Solve FX Crisis’— Cardoso

The Central Bank of Nigeria has disagreed with the position of the Senate on its reform measures saying the apex bank policies have attracted over $1bn from Foreign Portfolio Investors in past days.

Cardoso made the argument when he appeared before a Joint Senate Committee on Finance and Banking Institutions to defend his policies and their impacts.

Since the governor assumed office in 2023, he has been battling with rising inflation, which hit 28.92 per cent. The apex bank governor is also faced with a depreciating currency, which has fallen by over 98 per cent as of December 2023 after reintroducing the ‘Willing Buyer, Willing Seller’ model.

Despite measures introduced by the CBN under Cardoso, the naira has traded badly against the dollar at N1,417 on the official market. Inflation has not also eased in the country despite Monetary Policy Rate hikes since the new government came on board on May 29, 2023.

Cardoso, however, argued before the Senate that the forex position of the country is under pressure by excessive speculative demands, hoarding, inadequate forex supply, increased capital outflows and excess liquidity.

Cardoso said, “That finally there is no magic wand, unfortunately, and these are issues if we have to grapple with a greater movement in a period of time, and all we can do is try to use techniques tools which we believe are taking us in the direction of what the rating concerns and all that we need.

“We have started to see shifts in a positive direction. Indeed, we have already started to see the results with significant interest from foreign portfolio investors, which was a concern that had already begun to supply much greater foreign exchange to the economy.

“For example, a couple of the past few days, we have had over $1bn that have come into the market, over $1bn and this quite frankly is the answer to the question. The question was raised as to ‘how do we know that your policies are working?’ and in fact, we were challenged to say that in fact, they are not. And I would argue that with the numbers speaking and saying what is going on, the market has been responding to the policies that we have put in place.”

Cardoso said further steps have been taken to enhance liquidity in the foreign exchange markets.

Some of the policies he said include clearing outstanding FX obligations, introducing new operational mechanisms for BDCs and the net profit position limit.

“Our measures aimed at improving US dollar supply into the material economy has significant potential in taming the volatility of the exchange rates are in turn moderating inflation. However, for these measures to be sustainable, we must, as a country, moderate that demand for foreign exchange,” the CBN boss said.