Olayemi Cardoso, governor of the Central Bank of Nigeria (CBN), says weak naira can boost exports and make Nigeria competitive.
Speaking in Abuja during the Nigerian Economic Summit (NES)
on Wednesday, Cardoso said there are opportunities for people to invest despite
the weak currency.
“In terms of persuasion, what we need now is to ensure that
investments are here. Take, for example, now it may seem like a threat in the
sense that the exchange rate has come down so low. But that also is an
opportunity because what that means is that it can help to boost your exports,”
Cardoso said.
“This will make Nigeria to become a lot more competitive in
the export trade. I just want to encourage people to say that the opportunities
are here. Things are recalibrating in a particular direction. It’s not perfect,
but definitely there are opportunities for people to single out and invest.
“By the time you are
exporting to other countries with the cost of import here and the relatively
low naira, you will have a situation where you have to do things like that. And
I see it happening. Others are doing it and the interest is growing in leaps
and bounds.”
CBN announced the unification of all segments of foreign
exchange (FX) markets on June 19 — leading to the naira depreciating
significantly.
The naira has depreciated by 257.2 percent in the official
window and 121.7 percent in the parallel market between May 29, 2023, and
October 16, 2024.
According to data from the FMDQ Exchange, during the period
in review, the naira depreciated from N464.51 per dollar to N1,659.69/$ in the
official window.
In the parallel market, the naira has declined from N762/$1
to N1,690 per dollar within the reviewed period.
‘WORLD BANK’S
PROJECTION ON TRANSFORMING NIGERIA’S ECONOMY MISUNDERSTOOD’
Speaking on the reactions that trailed the statement of
Indermit Gill, senior vice-president of the World Bank Group, that Nigeria must
maintain its current reforms for the next 10 to 15 years to transform its
economy, Cardoso said his interpretation of the comment is different from what
the majority think.
“The issue of the
World Bank chief economist. I wasn’t here. But I read the speech. To be honest,
my interpretation wasn’t how others perceived it. I think he was basically
misunderstood,” Cardoso said.
“My understanding of what he said is that the policies of
the central bank are putting Nigeria on the right track.
“And frankly, I did not mention the World Bank when I said
earlier that if you look at the rating agencies and other international
financial institutions, it’s all the same thing. And I doubt we can all agree
on that.
“So I know that we are in a situation where many are very
cynical, perhaps understandably so, because of the way things have turned out
over a period of time. But I personally don’t think that cynicism should be the
order of the day today.
“I think that we
should accept that there have been a lot of mistakes made over a long period of
time. We should also accept that we risk the opportunity to diversify our
economy.
“We should accept that we are a monolithic economy. We
should also accept that any movement or shocks in a monolithic economy will
cause much more pain than if the economy were diversified. I think that is
justified.”
Some of the reforms by President Bola Tinubu’s
administration are the removal of subsidy on premium motor spirit (PMS), also
known as petrol, devaluation of the naira and increase in electricity tariff
for Band A customers, to reduce the federal government’s subsidy obligation.
During his swearing-in speech on May 29, 2023, Tinubu
announced the removal of the petrol subsidy, which has increased petrol prices,
transportation and production costs.
Prior to the removal of the petrol subsidy, the product was
sold between N195 and N238 per litre across the country, however, PMS now sells
above N998.
Additionally, on April 3, the Nigerian Electricity
Regulatory Commission (NERC) approved an increase in electricity tariff for
customers under the Band A classification.
The commission said customers under the classification, who
receive 20 hours of daily power supply, will pay N225 per kilowatt (kW) — up
from N66.
Following the development, the agency said the approved
tariff would reduce electricity subsidy for the 2024 fiscal year by about N1.14
trillion.
However, on May 6, electricity distribution companies
(DisCos) announced a reduction in the tariff of Band A customers to N206.80 per
kilowatt-hour.
The tariff was, however, increased on July 3 to N209.5 per
kilowatt-hour by four DisCos.
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