Governor of the Central Bank of Nigeria (CBN), Mr. Yemi Cardoso, has said the institution under him had no policy to defend the Naira in the forex market and the decline in the country’s foreign reserves should not be tied to the currency’s current improvement.
He spoke on Wednesday during discussions on the sidelines of the ongoing International Monetary Fund (IMF)/World Bank meetings in Washington D.C.
His words come on the heels of Tuesday’s Bloomberg about a reduction of the country’s foreign exchange reserves between March and April, coinciding with weeks of appreciation for the naira.
Bloomberg’s analysis said Nigeria’s liquid reserves declined 5.6 percent from March 18 to $31.7 billion as of April 12, and went on to credit the CBN with “using its FX reserves to clear the valid backlog and return the naira to a realistic exchange rate.”
According to Cardoso, his CBN had no intention to defend the naira.
Cardoso said, “Defending the naira, which seems to be the elephant in some rooms, I want to make it as clear as possible: It is not our intention to defend the naira.”
Explaining the decline, Cardoso said: “There have been little cases at the outset where the Bureau De Change (BDCs) needed tiny amounts of money to get that segment going.
“Debts were due, and they needed to be paid. Other times, money comes in. We have $600 million that came into the reserves. We want a market that operates on its own—a willing buyer, willing seller and price discovery.”
He highlighted the preference for a market-driven approach to price discovery, emphasising a vision where CBN intervention would be minimal except in extraordinary circumstances.
Cardoso stressed the importance of a vibrant currency market and ensuring sufficient liquidity, stating that interventions would continue to maintain market stability. He noted specific efforts to stimulate the Bureau de Change (BDC) segment and facilitate individuals’ access to funds for essential needs like education and healthcare.
Amidst discussions of taking “hard decisions,” Cardoso’s remarks underscored the CBN’s commitment to market dynamics and facilitating access to foreign exchange, rather than engaging in direct naira defense measures.
“What is important to us is there is sufficient liquidity in the market, which I have spoken about today, $1 billion is the outlier, sometimes $600, $700 million and that will continue. So as long as we have a vibrant currency market, why do we need to?” he said.
He disclosed that about $600 million has flowed into Nigeria’s external reserves.
He revealed: “Money comes in, in a couple of days, yesterday and today, $600 million came into the reserves.”
