Presidency backs CBN on efforts to sustain rising value of the naira

The Presidency on Tuesday said the concerted efforts of the Yemi Cardoso-led Central Bank of Nigeria aimed at stabilising the naira aligns with President Bola Tinubu’s “multi-faceted approach to ridding the nation’s foreign exchange market of malign actors and sharp practices.”

It also vowed to continue its campaign against racketeers, urging Nigerians to expect a stronger naira that would reflect in a significant drop in the prices of essential commodities by the first quarter of 2025.

The Special Adviser to the President on Media and Publicity, Ajuri Ngelale, who said this, spoke against the backdrop of the recent series of measures rolled out by the central bank to halt the naira free fall and return the local currency to its fair value.

The CBN had rolled out several circulars and directives, leading to the rebound of the local currency from 1,900/dollar recorded in late February to nearly 1,200/dollar on Tuesday at the parallel market.

 The naira, which had fallen against the greenback to over 1,500/dollar at the official market, also rose to about 1,230/dollar on Monday.

According to analysts, the CBN recent policies have played a pivotal role in the strengthening of the naira against the dollar.

Key reforms encompass the unification of exchange rate windows, liberalisation of the FX market, clearance of FX backlog obligations for banks and airlines, implementation of a Price Verification System, imposition of limits on banks’ Net Open Position, removal of the daily cap of N2bn on remunerable Standing Deposit Facility, and overhaul of the Bureau De Change segment.

A number of reforms in the FX market have adversely affected racketeers and currency speculators in the FX market and banking sector.

However, the Presidency on Tuesday vowed to sustain the momentum, saying regulatory agencies would go after racketeers and “malign actors” bent on frustrating the efforts of the government.

Beyond stabilising the exchange rate, the President also pledged to tackle inflation and bring it to a considerable rate.

The Special Adviser to the President on Media and Publicity, Ajuri Ngelale, told The PUNCH that President Tinubu “has been very consistent in his view that the labour pains felt by our people and the incredible sacrifices made by our people over the past 10 months would be rewarded across the board.”

Therefore, “The President’s multi-faceted approach to ridding the nation’s foreign exchange market of malign actors and sharp practices have provided a platform for the sustainable strengthening of our national currency against all global currencies and this is what we are seeing,” he said.

“But there is still much work to be done and this is not a time for celebration. It is a time for doubling down and working harder to ensure that inflation is sustainably brought down in short order and that consumer protecting regulatory agencies step up enforcement to ensure that our people are not short-changed by enterprises that fail to reflect the prevailing exchange rates on the pricing of goods and services across the board,” he added.

The Presidency also expressed confidence that the expected resumption of operations by private and government-owned crude oil refineries would boost revenue for the country and better the economy.

Upon assuming office 10 months ago, Tinubu discontinued subsidies on petrol, which, he said, would save the government monies for infrastructural expansion.

Presidency assures Nigerians

He also unified the foreign exchange rates to, among other things, curb currency arbitrage.

However, these moves sparked collateral instability in the value of the naira and heaped hardship on Nigerians as food prices soared.

On the inauguration day, the President’s announcement of “subsidy is gone!” sparked a cascading scarcity in petrol even as pump prices tripled within hours.

In a statement issued on May 31 and signed by its then Chief Corporate Communications Officer, Garba Deen Muhammad, the Nigerian National Petroleum Company Limited explained that the adjusted pump price aligned with “current market realities.”

The increased pump price led to the soaring prices of essential goods and services, raising the cost of living to an all-time high.

Consequently, the administration and the Organised Labour have been at each other’s throats for months over what the latter termed the government’s failure to assuage the pains of the people. Labour also argued that the N30,000 minimum wage was no longer tenable given the soaring cost of living.

Following intermittent strikes and calls for nationwide protests by the Nigeria Labour Congress and the Trade Union Congress of Nigeria, the Federal Government, on January 30, inaugurated a 37-member minimum wage committee to recommend a new national minimum wage for the country.

More so, the cost of living crisis was exacerbated by the floating of the naira in the Investors & Exporters FX window. In February 2024, the local currency suffered an all-time low in value, exchanging for N1,900/$. It was exchanged for about N800/$ at the start of the administration.

However, the naira has recently seen a steady gain against the US dollar, exchanging N1,200/$.

More so, the CBN, in an effort to rectify distortions in the retail segment of Nigeria’s foreign exchange market and bridge the widening gap in the exchange rate, began the sale of FX to BDC operators at lower rates.

In March, the apex bank sold $10,000 to BDCs at a rate of N1,251/$ and directed the BDCs to sell to eligible customers at a rate not exceeding 1.5 per cent above the purchase price (N1,269/$1).

 In April, it sold $10,000 to each BDCs at N1101/$ and directed the operators to sell at a spread not more than 1.5 per cent above the CBN rate.

The CBN also directed all eligible BDCs to commence payment of naira deposit into the designated CBN accounts from April 8, 2024.

The CBN’s efforts also include investigation of entities whose actions it believes are undermining the economic reform efforts of the Tinubu administration.

In late March, Cardoso revealed that security agencies including the Economic and Financial Crimes Commission were investigating questionable foreign exchange allocations and forward contracts previously estimated at $2.4bn.

The new CBN administration had engaged a global firm, Deloitte, to carry out an audit of the $7bn debts. Cardoso had earlier said about $2.4bn FX allocations from the $7bn backlogs were invalid.

The development came as two executives of the global cryptocurrency trading platform, Binance, were detained and being investigated for tax evasion and other offences.

On April 8, 2024, the CBN directed all banks in Nigeria to stop the use of foreign currencies as collateral for naira loans within 90 days. It disclosed this in a circular titled “The use of foreign-currency-denominated collaterals for naira loans” with ref number BSD/DIR/PUB/LAB/017/004.

The regulator said it had observed the use of FCY by bank customers as collateral for naira loans and, therefore, prohibits it with immediate effect.

It, therefore, directed banks to trim all existing loans with foreign currency collaterals to 90 days or attract a 150 per cent capital adequacy ratio computation as part of the bank’s risk.

However, the Presidency said despite these efforts and the early gains realised, it is not yet Uhuru until these benefits reflect in the lowering of prices of essential goods and services for the average Nigerian.

The Presidency, directed consumer protection agencies to ensure that the local prices reflected the rising value of the naira.

“But there is still much work to be done and this is not a time for celebration. It is a time for doubling down and working harder to ensure that inflation is sustainably brought down in short order.

“As our private and publicly-owned refineries resume operations between now and the first quarter of 2025, the nation’s cash position will dramatically improve to the extent that Nigerians can rightly expect a stronger Naira and a fair reflection of its strength in the prices of commodities in the market place,” said Ngelale.

The Presidency also assured Nigerians of the better days ahead saying the benefits of the reforms will be “more evident” as the administration progresses.

“Once you join the rising spending power of Africa’s largest population with the historic availability of trillions of naira for consumer credit that will bolster the real sector, you will see why Nigerians will be most pleased that they elected a financial engineer and businessman as president by the end of his first term in office, even as the signs are increasingly more evident today,” the Presidential spokesman concluded.