Central Bank of Nigeria (CBN) governor, Mr. Olayemi Cardoso, says the apex bank is not artificially shoring up the value of the naira with the country’s foreign reserves.
Speaking at a meeting of the International Monetary Fund (IMF) and the World Bank, Wednesday, Cardoso said the naira is performing independently and on its own strength, and that the local currency’s recent appreciation is not contrived, as is being speculated in some quarters.
Cardoso further said the CBN was practicing the principle of willing buyers-willing sellers in that regard.
The willing buyer willing seller standard is one in which the amount that an educated, un-coerced buyer is willing to pay, intersects with the amount that an educated, un-coerced seller is willing to accept.
Cardoso’s clarification came following speculations that the bank pumped foreign exchange into the market, thereby depleting the country’s foreign reserves, with a view to artificially shoring up the value of the local currency in the foreign exchange market.
Cardoso said: “Defending the naira, from every indication, is an elephant in some rooms. I will make this as clear as possible. It is not our intention to defend the naira. Much as I have read in the recent few days, some opinions about what has happened in terms of our reserves being drawn down, and the CBN defending the naira, if you take your mind to our philosophy and policy, you will see it will be counter-intuitive. We want the naira to perform independently, as long as we have a vibrant forex market.
“Initially, we needed to keep the BDCs going. So, it is important for people to get forex for school fees, travel and the like.”
He said the country had rather expended foreign exchange in the settlement of some of its external obligations.
“The shift you see in our reserve is not to defend the naira but for things like settling obligations that fell due. Mind you, that is the reason for keeping foreign reserves, in the first place.”
He added: “Let me be upfront in saying that the monetary policy is only one side. It is very clear to us that we need to have a very good handshake with the fiscal authorities.
“For instance, food inflation is not within the purview of the CBN. Ways and Means is now less an issue.”
He said the CBN was charting the orthodox central banking route to build confidence in the local currency.
He said he would henceforth communicate more with Nigerians so as to carry them along with the purpose, policies and principles of the bank.
“We want Nigerians to be realistic in their expectations. We have used the MPC to explain why we took the measures that we have taken,” he said.
