The Worst Is Over for Naira’s Fluctuations, Says CBN Governor Olayemi Cardoso

The Central Bank of Nigeria (CBN) has expressed optimism regarding the stability of the naira, suggesting that the worst of its recent fluctuations may be over. In a recent interview with Bloomberg TV, CBN Governor Olayemi Cardoso conveyed a positive outlook on the naira’s future, highlighting the significant progress made in curbing its volatility.

“We do believe that we have more or less seen the worst in terms of volatility,” Cardoso stated, emphasizing his confidence in the measures implemented by the CBN to stabilize the currency. This statement underscores a pivotal moment for Nigeria’s economic outlook, suggesting a potential turning point in the management of the naira.

Cardoso attributed this newfound stability to several decisive actions taken by the central bank. He underscored the commitment of the Monetary Policy Committee (MPC) to deploying all necessary measures to curb inflation and maintain currency stability. The governor emphasized the importance of continuous monitoring and intervention in the market to ensure optimal performance. “We are also very alive to observing the way and manner in which that market operates and ensuring that it gives the best value that can be accomplished using certain tools,” he added.

The governor’s optimism stems from the CBN’s multi-pronged approach to stabilizing the naira. Prior to recent interventions, speculation and manipulation in the FX forward contract market were significant contributors to the naira’s volatility. In response, the CBN tightened regulations, increased transparency, and potentially intervened directly to smooth out imbalances by releasing FX initially withheld from foreign companies.

Another significant move was the CBN’s decision to allow the naira to trade more freely, reflecting market forces. This includes raising interest rates to make naira-denominated assets more attractive and curb inflation, which had previously weakened the currency. Though not explicitly mentioned by Cardoso, the CBN also resorted to strategic interventions in the foreign exchange market by buying or selling naira to influence its value.

While acknowledging progress on the exchange rate front, Governor Cardoso emphasized the CBN’s unwavering commitment to tackling inflation. Nigeria’s high inflation rate of 33.95% (as of May 2024) continues to be a major concern. The MPC is likely to continue using interest rate adjustments and other measures to bring inflation under control.

Cardoso’s comments offer hope, but challenges remain. The CBN will need to maintain a watchful eye on the foreign exchange market and inflation, potentially making further adjustments as needed. External factors and domestic economic developments can always introduce new challenges.

The CBN’s continued efforts to maintain a stable exchange rate and control inflation will be crucial for a more prosperous future for the Nigerian economy. Governor Cardoso’s optimistic outlook suggests a positive trajectory for the naira, but vigilance and adaptability will be key in navigating the complexities of Nigeria’s economic landscape.

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