The testimony of the Governor of the Central Bank of Nigeria, Olayemi Cardoso, before the House of Representatives Committee on October 11, 2024, highlighted some crucial economic data for the country. These included the impressive jump in Nigeria’s foreign exchange reserves to $39.12 billion in October, an increase of 12.74 per cent from the June figure of $34.70 billion. The significant increase was driven by foreign capital inflows, oil-related tax revenues and partnerships.
However, the Governor stressed that despite slightly declining inflation and signs of stability thanks to the monetary policy measures put in place, inflation remained a major concern. He said that while inflation had shown “gradual moderation”, it indicated that monetary policy measures were beginning to have an impact. He also pointed out that in September, the consumer price index increased to 32.7%, after experiencing a slight decline in July and August.
Regarding the developments in the foreign exchange market, the Governor highlighted the reforms implemented, including the strategy of unifying the various foreign exchange windows into a single model, thus adopting a “willing seller and buyer” approach to improve foreign exchange liquidity and ensure financial market stability. These reforms have helped reduce exchange rate disparities between the various segments of the foreign exchange market, thus promoting exchange rate convergence.
To combat inflation, the Central Bank has adopted an orthodox monetary approach, with an 850 basis point increase in the policy rate to 27.25%, an increase in the reserve requirement ratios and the normalization of money market operations. Furthermore, the Bank has implemented an inflation-focused monetary policy framework aimed at stabilizing prices, optimizing liquidity management and ensuring an effective monetary policy framework.
In conclusion, Governor Cardoso’s testimony reveals prudent management of foreign exchange reserves and a proactive approach to controlling inflation, highlighting efforts to strengthen Nigeria’s financial stability. The actions undertaken by the Central Bank are aimed at consolidating market confidence and fostering an investment-friendly environment, with the aim of stimulating economic growth and ensuring the country’s long-term prosperity.