The new Central Bank of Nigeria (CBN) Governor, Olayemi Cardoso, has outlined his plans to stop the naira’s free fall against the dollar. His plan rests on two key strategies:
- Clearing the backlog of due dollar obligations: Cardoso believes that clearing the backlog of dollar obligations owed by the CBN will help to reduce the pressure on the naira and free up operations of the foreign exchange market.
- Enforcing compliance with foreign exchange market rules: Cardoso has also vowed to enforce compliance with all rules that pertain to making the foreign exchange market open and transparent to investors.
Cardoso’s plan is in line with the views of Finance Minister Wale Edun, who last week said that it will take clearing Nigeria’s outstanding forward payment of $6.8 billion for the naira to have a chance of stability.
Analysts have expressed some concern about Cardoso’s lack of experience in central banking. However, Cardoso has assured Nigerians that his experience in commercial banking will not compromise his ability to effectively regulate the banking sector.
What does this mean for the naira?
It is too early to say definitively whether Cardoso’s plan will be successful in stopping the naira’s slide. However, his commitment to clearing the backlog of dollar obligations and enforcing compliance with foreign exchange market rules is a positive step.
If Cardoso is able to successfully implement his plan, it could help to boost investor confidence in the Nigerian economy and lead to a more stable naira.