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Cardoso highlights achievement in FX stability as Nigeria secures $2.25bn World Bank loan

Olayemi Cardoso, naira

The Governor of the Central Bank of Nigeria (CBN), Olayemi Cardoso, has explained what the apex bank has been able to achieve in foreign exchange stability, even as the Federal Government of Nigeria has announced its qualification for a loan from the World Bank, totaling $2.25 billion.

Speaking at a joint press briefing with the Minister of Finance and Coordinating Minister of the Economy, Wale Edun, on the sidelines of the IMF/World Bank Spring Meetings held in Washington DC, United States, Governor Cardoso said the apex bank is no longer in “firefighting” mode and has now switched to enhancing the ease of doing business within Nigeria.

This transition comes after six months of grappling with numerous economic challenges, including rampant inflation and volatility in the foreign exchange market.

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This strategic pivot aims to consolidate the recent gains by fostering an efficient and transparent market system, which in turn is expected to boost financial and economic inclusion for small businesses and households.

“In the six months since assuming the position of Central Bank Governor, the challenges have been significant, from grappling with inflation to addressing volatility in the foreign exchange market.

“However, with relative stability now achieved, particularly in the FX market, we have transitioned from firefighting to strategic planning across key areas.”

“Key initiatives include leveraging technology and remote banking solutions to decrease transaction costs and widen access to financial services.

“These measures are part of a broader agenda to create a more resilient and inclusive economic framework, moving away from the emergency measures that previously dominated the central bank’s agenda”.

Governor Cardoso emphasised the need for a sequenced approach to address ongoing and future challenges, ensuring the CBN works closely with stakeholders such as investors, banks, and businesses.

This collaborative effort underscores a renewed commitment to orthodox monetary policies, aiming to rebuild trust and confidence in Nigeria’s economic management and leadership.

Cardoso also responded to the current exchange rate depreciation experienced over the weekend as the naira weakened on the official and parallel market on Friday.

According to Cardoso, the weakness seems to be volatility in the exchange rate and that Nigerians should “expect that there will increases, here and there, ups and down”, highlighting the fact that the Naira also rebounded during the weekend.

He also emphasised that the most important thing is that they are doing “everything possible to ensure that this is an exchange rate that finds adequate price discovery level” as policy reforms continue to take hold.

Cardoso touted the response from foreign portfolio investors as being “positive” and expects that the “positive sentiments will continue to improve” in terms of continuous investor inflows into the country.

On qualification for a loan from the World Bank, totalling $2.25 billion, the Finance minister, Wale Edun, said the package, approved by the Board of Directors of the World Bank, offers a 40-year term with a 10-year moratorium and a nominal one per cent interest rate.

Edun said: “If you look at the fact that we have qualified for the processing, just this week to the Board of Directors of the World Bank, of the total package of $2.25 billion of what you can call, I mean if there is no such thing as a free lunch, but it is the closest you can get to free money. It is virtually a grant. It is for about 40 years, 10 years moratorium and about one per cent interest. So that also is part of the flow you can count.”

He added that Nigeria is set to benefit from budgetary support and low-interest funding from the African Development Bank, noting that negotiations with foreign direct investors are also underway.

Edun addressed concerns about debt sustainability by emphasising the pivotal role of revenue generation in Nigeria’s economic strategy.

He highlighted oil revenue as a primary source and President Bola Tinubu’s ambitious goal to increase oil production from 1.6 million barrels per day to 2 million barrels per day.

“These measures are crucial for enhancing our fiscal resilience and ensuring long-term economic stability,” the finance minister said.

In a bid to strengthen its foreign exchange reserves and attract investment, Nigeria is exploring innovative avenues with particular emphasis on leveraging remittances from its diaspora community.

The Finance minister underscored the immense potential of Nigerians living abroad, acknowledging their substantial financial resources that could significantly benefit the Nigerian economy.

“There are Nigerians abroad who are thriving financially,” remarked Edun, emphasizing their capacity to make substantial contributions to Nigeria’s economic growth and development.

“The government is looking at attracting those funds and capturing those funds through a diaspora type of instrument, a diaspora bond. We think that would be a very attractive instrument for Nigerians abroad and for foreign holdings of foreign currency and we look to having a substantive, substantial and successful issue later in the year,” Edun revealed.

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