The Central Bank of Nigeria (CBN) has linked the turbulence in the foreign exchange market to what it terms as “seasonal demands.”
During the 295th Monetary Policy Committee (MPC) meeting in Abuja on Tuesday, CBN Governor Olayemi Cardoso pointed out that the recent increase in interest rates, from 24.75 percent to 26.25 percent, was a response to this issue.
Cardoso explained that the fluctuations in the foreign exchange market were primarily due to fluctuations in demand, which are a natural consequence of the functioning of a free market system.
Over the past year, the Nigerian currency has witnessed unprecedented volatility since President Bola Tinubu took office. From hovering around N700 to the dollar in May 2023, it plummeted to an all-time low of approximately N1,900 to the dollar in February 2024. Although it recovered slightly in April to about N1,100 to the dollar, it then experienced a sudden decline to N1,600 to the dollar in May 2024.
Despite these challenges, Cardoso expressed optimism, stating that there are signs of improvement and that the measures implemented by the CBN are yielding results. He noted a slight increase in the country’s external reserves from March to April 2024 and emphasized the importance of maintaining this positive trend.
Regarding foreign inflows, which constitute about 6% of Nigeria’s Gross Domestic Product (GDP), Cardoso highlighted the goal of doubling remittance flows within the year.
The CBN aims to achieve this by engaging with stakeholders and implementing tighter regulations and technological advancements if necessary. In March, the economy recorded over $1.5 billion in foreign exchange inflows.
Meanwhile, Cardoso mentioned the recent approval of 14 International Money Transfer Operators (IMTOs) by the CBN, which is expected to enhance competition, reduce transaction costs, and attract more remittances through formal channels. He stated that these IMTOs responded positively to the adjustments in pricing, commissions, and charges and encouraged them to continue utilizing official channels for transactions.
Furthermore, Cardoso assured that despite the economic challenges, the banking system remains stable and resilient.
