Capital Market, Other Stakeholders Await Cardoso’s Monetary Policy Direction

As the Governor of the Central Bank of Nigeria (CBN), Mr Olayemi Cardoso settles in, both local and foreign investors, Money, and Capital Market operators are anxious as to the direction he would take to lead the apex bank.
Although Cardoso had hinted at the direction he would like the CBN to go. That would be tested after his first Monetary Policy Committee (MPC) meeting.
Recall, the Monetary Policy Committee (MPC) of the CBN scheduled for Monday and Tuesday, September 25 and 26, 2023, was deferred.
Although no cogent reason was given for the deferment, the apex bank assures that a new date would be communicated in due course.
After, the meeting, it is expected that the market would react to whatever stance the bank would take whether positively or negatively.
Cardoso said, the bank under his leadership would focus mainly on the core mandate of price stability.
The bank said, as part of its responsibility to ensure price stability, the CBN would boost liquidity in the Nigerian Foreign Exchange Market by interventions from time to time. The bank said, as market liquidity improves, these CBN interventions will gradually decrease.
Cardoso said, he and his team were determined to change the narrative about the Bank and make the Bank more impactful in the lives of Nigerians by curtailing inflation.
He said, “at the end of our tenure, we want to look back and see that our policies have positively impacted people’s lives.”
He said, in refocusing the CBN to its core mandate, there is a need to pull the CBN back from direct development finance interventions into more limited advisory roles that support economic growth.
According to him, these advisory roles could include, for instance: “Acting as a catalyst in the propagation of specialised institutions and financial products that support emerging sectors of the economy.
“Facilitate new regulatory frameworks to unlock dormant capital in land and property holdings.
“Accelerate access to consumer credit and expand financial inclusion to the masses.
“De-risking instrumentation to increase private sector investment in housing, textiles and clothing, food supply chain, healthcare, and educational supplies. These verticals have huge demand patterns, with the potential for high local inputs and value retention, and can be the basis for rapid industrialisation.
“Exercise CBN’s convening power to bring key multilateral and international stakeholder participation in government and private sector initiatives’.
Recently, the bank restated its commitment to boosting liquidity in the Nigerian Foreign Exchange Market and has opened the floodgates for the previously restricted 43 items by Mr. Godwin Emefiele-led administration to access Forex for importation.
The apex bank said, “importers of all the 43 items previously restricted by the 2015 Circular referenced TED/FEM/FPC/GEN/01/010 and its addendums are now allowed to purchase foreign exchange in the Nigerian Foreign Exchange Market”.
The bank said, it would continue to promote orderliness and professional conduct by all participants in the Nigerian FX Market to ensure that market forces determine exchange rates on a Willing Buyer – Willing Seller principle.
In August 2023, President Bola Tinubu said his administration was undertaking a comprehensive forensic audit of the Central Bank with a thorough overhaul.
Tinubu told the President of the World Bank, Mr. Ajay Banga, at the Presidential Villa, Abuja that a comprehensive forensic audit is ongoing at the Central Bank. We are going to do a very serious structural review of the Civil Service payroll. I can’t believe in the numbers I’m seeing and I’ve had that experience before at the state level”.
He noted that a Forensic audit of CBN is underway as the country wins back investor confidence, President Tinubu told World Bank Chief.”
Tinubu said the reforms are in tandem with Nigeria’s Ease of Doing Business programme.
Tinubu said, he would block all financial loopholes, adding that the reforms will be targeted at the way we work, change of attitude, and equally on educating our people. It’s costly but we will do it,” he said.
He also disclosed the ongoing efforts to address issues such as subsidy removal, foreign exchange mismanagement, exchange rates, inflation, liquidity, and debt management.
Meanwhile, Nigeria’s headline inflation rate, on a month-on-month basis, in October 2023, stood at 1.73%, 0.37% lower than the rate recorded in September 2023.
Speaking recently in Abuja on the latest NBS figures, the spokesman of the CBN Dr. Isa AbdulMumin, expressed optimism that the low rate of increase in the average price level in October compared to September 2023, was a pointer to the fact that the Bank’s monetary policy stance to tighten rates and its money market reforms were yielding the desired effect.
Aggressive monetary tightening using various liquidity mechanisms including removing the cap on the Standing Deposit Facility (SDF) and Open Market Operations Had raised Open Buy Back (OBB) rates from less than 1% in August to their expected levels around the monetary policy rate today.
The bank said, in spite of 0.61% increase in the headline inflation rate from 26.72% in September 2023 to 27.33% in October 2023, Isa remained upbeat that the CBN was headed in the desired direction in terms of achieving price stability.
According to him, available statistics showed that the first indication of deceleration in prices was recorded in September and further reforms in the money market, which commenced in October, had accelerated easing in prices as indicated by the substantial drop in month-on-month changes recorded in October.
“Moderation in month-on-month changes in prices observed in the headline, food, and core components of the consumer basket followed reforms in the money market and relative stability in the FX market,” he added.