The Governor of the Central Bank of Nigeria (CBN), Mr Yemi Cardoso, says the the country’s currency, the Naira, is grossly undervalued against international currencies.
Cardoso said this on Tuesday in Abuja, while presenting a communiqué from the 293rd meeting of the apex bank’s Monetary Policy Committee (MPC).
He said that the foreign exchange market had not been functioning effectively and had been distortionary in outcome, thereby creating a serious challenge for the Naira.
“We are presently investigating some of the manipulations that have been taking place.
“For distortions that came up due to bad behaviour, those involved will be made to face the full wrath of the law, ” he said.
The CBN governor said that the apex bank was clearing the backlog of genuine forex claims, adding that the country’s foreign reserves now stood at 34 billion dollars
“Just today, we paid another 400 million dollars to those that have been so identified,” he said.
He said that it was important that the foreign exchange market had a good amount of liquidity and minimal distortion.
“In recent times we have been able to attract liquidity into the system.
“We have attracted up to two billion dollars as a result of the tools that we have used to calibrate interest rate.
“We are collaborating with law enforcement agencies to ensure that we can understand better what is going on in the market.
“We are moving to a very aggressive regulatory environment where we will have zero tolerance for sharp practices,” he said.
“He said that players in the market would have to abide by all CBN regulations as those who refuse would face the consequences.
According to him, a very thorough exercise is going on to identify what went on in the past and what needs to be done.
Cardoso said that the CBN was moving away from interventions programmes and development finance initiatives like the Anchor Borrowers Programme, as they were time-consuming and counterproductive.
“Everybody’s concern js about price stability, and we should put everything we have into ensuring price stability.
“The interventions took away a lot of time for things we do not have the expertise to do, and it created a lot of distortions in the economy through inflow of money supply.
“The interventions that took place in the recent past were estimated in excess of N10 trillion. It did a lot of damage to the economy, ” he said.
He, however, said that the apex bank was taking concrete steps to recover loans that were given out through such interventions.
The Tuesday’s MPC meeting was the first under Cardoso as CBN governor.
Earlier, Cardoso had announced an aggressive tightening of the rates, as the committee increased the benchmark interest rate, the Monetary Policy Rate (MPR) by 400 basis points from 18.75 per cent to 22.75 per cent.
The committee also raised the Cash Reserve Ratio (CRR) from 32.5 per cent to 45 per cent, and adjusted the Asymmetric Corridor from +100/-300 basis point to +100/-700 basis point around the MPR.
It, however, retained the Liquidity Ratio at 30 per cent.
