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CBN Gov, Cardoso Outlines Monetary Policy Outlook For 2024

…Assures Nigerians of price, exchange rate stability

…Bank adopts Inflation Targeting Framework

LAGOS – The Governor of the Central Bank of Nigeria (CBN), Mr. Olayemi Cardoso, has outlined the policy direction of the Bank for 2024, with a pledge to prioritise price and exchange rate stability to promote sustainable economic growth, safeguarding the livelihoods of Nigerians.

Mr. Cardoso disclosed this in his keynote address at the 58th Annual Bankers’ Dinner and Grand Finale of the 60th anniversary of the Chartered Institute of Bankers of Nigeria (CIBN), held at Eko Hotels & Suites, Victoria Island, Lagos, on Friday, November 24, 2023.

While assessing the performance of the CBN in the past two months, he informed the audience that the new leadership of the Bank had critically reviewed the effectiveness of the Central Bank’s monetary policy tools and had spent time fixing the transmission mechanism to ensure the decisions of Monetary Policy Committee (MPC) meetings actually resulted in desired objectives. According to him, there had been a dislocation of monetary transmission mechanism, for quite some time, which rendered the MPC meetings largely ineffective. Therefore, to address this challenge, he said the Central Bank of Nigeria was committed to achieving monetary and price stability. “This is not just a technical objective, but it has real-life implications for the well-being of our citizens. Through targeted policies, transparent market operations, and coordination between monetary and fiscal authorities, we can ensure a more stable exchange rate, control inflation, and create an enabling environment for businesses and individuals to thrive,” he added.

Speaking further on the exchange rate, he disclosed that he had held meetings with business owners engaged in international trade, who recounted the difficulties they experienced with the fluctuations in the exchange rate, which often led to uncertainties and unexpected costs. He stated that it was, therefore, imperative that the Bank provides transparency and creates a market environment that allows fair determination of exchange rates, ensuring stability for businesses and individuals alike. As an adviser to the government, he reiterated that the CBN would be repositioned as a catalyst for economic stability and growth. He explained that instead of direct interventions, the Bank would collaborate with stakeholders and formulate policies that create an enabling environment for sustained economic growth and development. “Our catalytic role will support increased investment and private sector participation in the economy, improve access to finance for MSMEs, and enhance financial services for the underbanked. This includes promoting specialized institutions and financial products to support emerging sectors, developing regulatory frameworks to unlock dormant capital in land and property holdings, facilitating accelerated access to consumer credit, and expanding financial inclusion to reach the masses,” he added.

Mr. Cardoso explained that the CBN would work with experts to develop de-risking instruments that encourage private sector investment in key industry verticals such as: housing, textiles and clothing, food supply chain, healthcare, and educational supplies, which have a high potential for local inputs and value retention. The CBN Governor said the Bank was conducting a comprehensive review of the licensing framework for payment services, adding that the CBN would engage in extensive consultations to develop a new regulatory and compliance framework that is suitable for the technology-driven payment services sector. He, therefore, charged banks to reassess the responsible banking framework to ensure that the requirements are effectively integrated into their strategies. He also disclosed that the CBN was enhancing its in-house capacity so that it can assist other banks that still have progress to make in implementing their sustainability principles. Going forward, he said the new team at the CBN would tackle institutional deficiencies, restore corporate governance, strengthen regulations, and implement prudent policies.

“We assure investors and the business community that the economy will experience significant stability in the short-to-medium term as we recalibrate our policy toolkits and implement far-reaching measures. “We will stand by Nigeria and Nigerians. Our actions will be fully guided by the principles of transparency, responsibility, and a deep commitment to Nigeria's progress,” he declared. Speaking on the outlook for 2024, Mr. Cardoso noted that, the CBN, in line with the strategy to refocus on the Bank’s core mandate, will discontinue direct quasi-fiscal interventionist activities and instead utilize orthodox monetary policy tools for implementing monetary policy. Accordingly, he said the CBN had approved the adoption of an explicit inflation-targeting framework to enhance the effectiveness of its monetary policy. He, however, added that the details and requirements for the framework were currently being finalized alongside the fiscal authorities. He said the CBN would also provide forward guidance, enhance transparency, and maintain effective communication with the public to anchor expectations and build trust among stakeholders.

The Governor further expressed optimism that the Bank’s monetary policies will achieve price stability, foster sustainable economic growth, stabilize the exchange rate of the naira, and reduce interest rates to facilitate borrowing and investments in the real sector. In order to ensure the proper functioning of domestic and foreign currency markets, he emphasised that it was essential to have clear, transparent, and harmonized rules governing market operations. He also added that new foreign exchange guidelines and legislation will be developed, and extensive consultations will be conducted with banks and FX market operators before implementing any new requirements.

Speaking on the capital adequacy of Nigerian banks, the Governor said it was crucial to evaluate the adequacy of the banking industry to serve the envisioned larger economy, particularly as it relates to a $1 trillion economy being targeted by President Bola Ahmed Tinubu. Despite concerns about the current state of the country’s economy, he reiterated that the challenges were not insurmountable. Earlier in his goodwill message, the Governor of Lagos State, Mr. Babajide Sanwo-Olu, who was represented by the State Commissioner for Finance, Mr. Abayomi Oluyomi, commended the CBN Governor and his team for their contributions to the growth of the economy and wished them well in their objective of repositioning the CBN to deliver a more stable financial system.

The event was graced by the Vice President, Senator Kashim Settima, who was represented by the Special Adviser to the President on National Economic Council and Climate Change, Mrs. Rukaiya El-Rufai. Some other dignitaries at the dinner were the Chairman, Senate Committee on Banking, Insurance and Other Financial Institutions, Senator Tokunbo Abiru; the Deputy Governor, Corporate Services, Dr. Bala Bello; the Deputy Governor, Economic Policy, Mr. Muhammad Sani Abdullahi; the Deputy Govenor, Financial System Stability (FSS), Mr. Philip Ikeazor, and the Deputy Governor in charge of the Operations Directorate, Ms. Emem Usoro; Directors of the Bank and Executives of Deposit Money Banks, amongst various others.