Cardoso Reflects on Key Policies as CBN Launches Electronic Forex Matching System
The Governor of the Central Bank of Nigeria (CBN), Olayemi Cardoso, when he unveiled the rationale behind the implementation of the Electronic Foreign Exchange Matching System (EFEMS) over the weekend, reflected on some of the major policies his leadership of Nigeria’s apex bank has introduced over the last one year.
While the apex bank chief, who was appointed by President Bola Tinubu on September 15, 2023, explained that the EFEMS will help instill trust which is foundational to central banking and crucial for maintaining monetary policy efficacy, he defended some of his policies, from collapsing the exchange rate to hike in interest rate.
Cardoso stated this while speaking on the topic “Leadership in Challenging Times: Restoring Credibility, Building Trust, and Containing Inflation,” when he addressed members of the Harvard Club of Nigeria in Lagos at the weekend.
“Trust is the currency of central banking,” he stated. “If the public loses trust in the institution, the effectiveness of its policies diminishes.”
Recalling his journey, Mr. Cardoso noted that the credibility of the CBN must underpin every action taken. He acknowledged that the decision to float the naira, initially met with public skepticism, was essential for aligning the official exchange rate with market realities.
“Without credibility, no policy, however well-intentioned, can succeed,” he asserted.
He also explained that closing the gap between official and parallel rates was a painful but necessary step to reduce arbitrage and speculation, which had eroded market trust.
“Credibility is earned through consistency,” he added, noting that recent reductions in speculative trading indicated a return to stability in the currency markets.
While addressing the ongoing challenge of inflation, Cardoso acknowledged that the CBN has yet to meet its target. However, he pointed to recent declines in inflation reported by the National Bureau of Statistics (NBS) as evidence that progress is being made.
“Our decision to raise the Monetary Policy Rate (MPR) to 27.25% was a bold move,” he remarked. “Higher interest rates, though difficult for borrowers, are necessary to control excess money in circulation and curb inflation.”
Cardoso also shared key leadership insights, stating, “Leading through challenging times means resisting the urge to take on too many initiatives. The Central Bank must remain focused on its core mandate of price stability.”
He stressed that effective communication is just as crucial as the right policies. “Transparency is our guiding principle,” he declared, pointing to the CBN’s commitment to clear communication, including the publication of Dutch Auction results and regular economic updates.
