The Central Bank of Nigeria (CBN) reported a positive development in the country’s economic landscape. A statement released by the bank’s acting Director of Corporate Communications, Mrs. Sidi Ali, revealed a significant inflow of foreign exchange exceeding $1.5 billion over the past few days. This influx is seen as a positive response to the CBN’s recent monetary policy efforts.
Foreign Exchange Market Stabilization and Naira Appreciation
According to Mrs. Ali, the data indicates a connection between the inflow and the CBN’s initiatives to stabilize the foreign exchange market. The Naira has shown a steady appreciation, trading at N1,309/$1 on the Autonomous Foreign Exchange Market (AFEM) as of March 29, 2024. This represents a notable improvement compared to N1,611/$1 just two weeks earlier.
The CBN recently raised the Monetary Policy Rate (MPR) by 200 basis points to 24.75%, a decision that initially sparked concern among some citizens and economic experts. However, Governor Olayemi Cardoso of the CBN emphasized that the move aimed to achieve parity between interest rates and current inflation. He assured the public that the increase wouldn’t be long-lasting.
Furthermore, Governor Cardoso reiterated the bank’s successful clearing of all verified foreign exchange backlogs during a post-meeting briefing. This action, along with the interest rate hike, is believed to be contributing to improved liquidity in the forex market.
Continued Commitment to Naira Stability
While acknowledging the potential drawbacks of high interest rates, Governor Cardoso highlighted the positive impact of a stabilizing exchange rate on moderating overall inflation. He emphasized the need for collaboration between the CBN and the fiscal authorities to ensure a sustainable economic recovery.
Mrs. Ali’s statement concluded with a reassuring message, expressing the CBN’s unwavering commitment under Governor Cardoso’s leadership to ensure market stability and achieve an appropriate exchange rate for the Naira against other major global currencies.
“While the increase in interest rate may have tendencies toward strangulating the economy, with the foreign exchange rate coming down, that also helps to moderate it overall.
“And as I said earlier, you would expect that this would not be too long drawn; at least I would hope so. We are getting towards a situation where the exchange rate is moderating, and we are expecting it to moderate, and then it finds a level that, quite frankly, is sustainable. This would involve huge collaboration with the fiscal side because a lot of that cannot just rely on the monetary side alone,” the governor said.
Source: Punch
