THE Governor, Central Bank of Nigeria (CNN), Olayemi Cardoso has explained that the exclusion of retained earnings from the recapitalization terms encourages banks to focus on raising fresh capital from external sources.
Speaking at the CEO Forum on the topic, ‘Revitalising Nigeria’s Economy: Strategic Monetary Policies for Economic Growth’ hosted by BusinessDay Media, he stated that the Monetary Policy Committee (MPC) is not oblivious to the fact that Nigeria needs growth.
He reiterated the need for policies that will positively impact the average Nigerian and foster a stable and prosperous economic environment for all citizens.
On the issue of Foreign Exchange (FX) volatility, Cardoso stated that the bank had to correct some dysfunctions in the financial system, such as illicit flows and non-compliance with rules, to ensure market stability.
“Sometimes, there is pushback from those who want to continue doing things a certain way. There’s also a need to show people that there will be consistency in our ways before the market will settle,” he said.
Cardoso admitted that before he got into the saddle, during the Senate hearings, he actually made the commitment to settle for example backlog.
“And I was very clear on that. A good number of people came to me and said, Look, this doesn’t make sense. Why would you prioritize so much money to pay back people and you know, businesses and all that where you can use that for actually growing and opening up the foreign exchange market? I got a lot of pressure on that.
“But I think what perhaps many failed to realize is that we are in a situation where Nigeria was in a state of crisis. Nigeria was in a state where there was a lot of loss of confidence. And to be honest with you, even without that, it is so important that you would hold high your integrity as a bank, your yes must be yes, “ he stated.
He noted that timely communication and market transparency have restored stakeholders’ confidence.
“There is no more front-loading of FX requests. Even the portfolio investors who left have come back. They were comfortable that there was a plan, and that the plan was headed in a certain direction. These dysfunctions are beginning to smooth out due to the confidence and transparency seen in the markets,” the CBN governor said.
Cardoso reaffirmed that the naira has seen the worst of sharp volatility and is now in calm waters.
“A lot of the wide swings were attributed to distortions in the system, but we are beginning to smoothen out as a result of a better understanding of the market, transparency, and doing things right,” he further stated.
The CBN governor revealed plans to double diaspora remittance flow into Nigeria in one year, adding that the ambition is an effort to ease issues in Nigeria’s financial sector.
“As a result of the challenges we have faced, one of the things we’ve done in the monetary side is to look at Diaspora remittances which is very key and we set up a committee last time I went to Washington for the World Bank meetings, and I invited the IMTOs,” he said.
He further, emphasized that addressing issues like illicit flows and non-compliance was crucial, although it initially met with resistance from market participants who front-loaded their requests.
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