19th July, 2024
The Central Bank of Nigeria (CBN)has noted that its monetary policies and actions have greatly contributed to the growth and stability of the nation’s economy.
During a session in Abuja on Friday with the Senate Committee on Banking, Insurance, and other Financial Institutions, CBN Governor Mr. Olayemi Cardoso noted that the positive economic indicators suggest a promising outlook for Nigerians.
Cardoso stated: “The gap between official and Bureau de Change (BDC) rates has narrowed considerably from N162.62 in January to N47.22 in June, reflecting successful price discovery, enhanced market efficiency, and reduced opportunities for arbitrage.
“As of July 16, our external reserves have risen to $36.89 billion from $33.22 billion at the end of December 2023, largely due to crude oil-related taxes and third-party receipts.
“In the first quarter of 2024, we maintained a current account surplus and saw improvements in our trade balance.”
He added that the level of external reserves as of June could cover over 11 months of goods and services imports or 14 months of goods alone, greatly surpassing the international benchmark of 3.0 months, thus providing a strong buffer against external shocks.
Cardoso noted that the banking sector remains robust and diverse, consisting of 26 commercial banks, six merchant banks, and four non-interest banks.
Key indicators such as capital adequacy, liquidity, and non-performing loan ratios have all shown notable improvements, demonstrating increased stability and resilience in the sector.
The equity market has also performed well, with the All-Share Index rising by 33.81 percent and market capitalization expanding by 38.33 percent from December 2023 to June 2024, indicating growing investor confidence.
While encouraged by these positive trends, the CBN is committed to implementing policies that promote sustainable growth in financial markets while maintaining overall economic stability.
Cardoso assured the committee that measures and strategies are in place to address emerging challenges.
To tackle inflation, the CBN has introduced a comprehensive set of monetary policy measures, including raising the policy rate by 750 basis points to 26.25 percent, increasing cash reserve ratios, normalizing open market operations, and adopting Inflation Targeting as the new monetary policy framework.
In banking supervision, the CBN has taken decisive actions to ensure the safety and resilience of the banking sector, including intervening in three banks, revoking Heritage Bank’s license, increasing minimum capital requirements, and enhancing anti-money laundering and counter-terrorist financing supervision.
New frameworks for Cash Reserve Requirements and cybersecurity have been introduced, and the use of foreign currency collaterals for local currency loans has been prohibited.
The CBN is also reviewing micro and macro prudential guidelines to strengthen the resilience of financial institutions and create a secure and attractive investment environment.
Cardoso mentioned plans to re-capitalize deposit money banks in Nigeria to address capital inadequacies and boost their capacity to support economic growth.
“Our ultimate aim is to create a more stable, resilient, and efficient financial system that serves the Nigerian economy better while adhering to international best practices,” he said.
Earlier, Sen. Adetokunbo Abiru, Chairman of the Committee, noted that the purpose of the meeting was to update the committee on the CBN’s efforts, activities, objectives, and plans regarding monetary policy.
