CBN Governor, Olayemi Cardoso Praises Bold Move to Float the Naira, Aiming to Bridge Exchange Rate Gaps

CBN Governor, Mr. Olayemi Cardoso, has defended the decision to float the naira in the foreign exchange market, stating it was essential for aligning the official exchange rate with market realities. Speaking at a recent event titled “Leadership in Challenging Times: Restoring Credibility, Building Trust, and Containing Inflation,” Olayemi Cardoso stressed that under his leadership, the CBN aimed to tackle the growing disparity between the official and parallel exchange rates.

According to Olayemi Cardoso, the difference between the two rates had fostered opportunities for arbitrage and speculation, weakening public confidence in the market. He acknowledged that the policy faced significant public criticism, but emphasized that it was a necessary measure to restore stability in the forex market and bolster transparency. The move, while challenging, was geared toward ensuring that the official exchange rate reflected true market dynamics.

CBN: Restoring Credibility as a Central Pillar of Monetary Policy

During the event, Olayemi Cardoso highlighted the importance of credibility in the CBN’s decision-making process. He pointed out that without credibility, even the most well-intentioned policies could fail. For the CBN, floating the naira and implementing tighter monetary policies were necessary steps to regain public trust and market stability. Olayemi Cardoso noted that his administration has focused on ensuring that the CBN’s actions are transparent and consistent with market expectations.

“Credibility is earned by consistency,” Olayemi Cardoso remarked, emphasizing that the floating of the naira sent a clear message to the market about the CBN’s commitment to sound monetary policy. By aligning the official exchange rate with market conditions, the CBN hoped to create a more predictable and reliable environment for both local and international market participants. This, in turn, would curb the speculative activities that had eroded confidence in the naira.

Addressing Public Criticism: Balancing Short-Term Pain and Long-Term Gains

The decision to float the naira has not been without controversy, as many Nigerians have expressed concerns about the immediate effects of the policy. Olayemi Cardoso acknowledged this public outcry but emphasized that leadership often requires making tough decisions for the greater good. He stated that while the short-term impact of floating the naira may be painful, the long-term benefits of a more stable and credible financial system far outweigh the temporary discomfort.

Olayemi Cardoso explained that by closing the gap between the official and parallel market rates, the CBN was tackling one of the key drivers of inflation and market instability. He argued that speculative trading had been fueled by the disparity in rates, and only by addressing this could the CBN restore balance to the economy. Although the policy has resulted in some short-term hardships, such as higher import costs, Cardoso believes that in the long run, it will help to stabilize prices and reduce inflation.

Monetary Policy Rate Hike: A Bold Move to Tame Inflation – CBN

In addition to floating the naira, the CBN has taken further measures to address inflation, including raising the Monetary Policy Rate (MPR) to 27.25%. Cardoso described this as a “bold move” aimed at curbing excess liquidity in the economy and controlling rising inflation. He acknowledged that the decision was tough, especially for borrowers who now face higher interest rates, but maintained that it was necessary to ensure long-term financial stability.

The hike in the MPR reflects the CBN’s commitment to reducing inflationary pressures by limiting the amount of money in circulation. Olayemi Cardoso reiterated that while the decision has caused short-term discomfort for businesses and individuals, it is a crucial step in stabilizing the economy. By controlling inflation, the CBN hopes to lay the groundwork for sustainable economic growth in the coming years.

CBN- Floating the Naira, A Step Toward Economic Transparency

Cardoso’s administration has positioned the floating of the naira as a key step toward greater transparency in Nigeria’s foreign exchange policy. By allowing the market to determine the exchange rate, the CBN has reduced the influence of artificial controls that previously distorted the currency’s value. Olayemi Cardoso emphasized that the shift was essential for regaining the trust of both local and foreign investors, as well as ensuring that the naira’s value reflected real economic fundamentals.

The governor noted that the CBN’s commitment to transparency and sound monetary policy would be essential for fostering long-term economic growth. By closing the gap between the official and parallel exchange rates, the bank hopes to create a more predictable environment for businesses and investors, reducing the uncertainty that has plagued Nigeria’s foreign exchange market in recent years.

Building Trust and Containing Inflation

Olayemi Cardoso outlined his vision for the CBN’s role in stabilizing Nigeria’s economy. He noted that the central bank would continue to focus on building trust in the financial system by maintaining consistent and credible policies. The floating of the naira and the hike in interest rates are just the first steps in a broader strategy aimed at containing inflation, restoring credibility, and ensuring long-term economic stability.

Olayemi Cardoso also hinted at additional measures that may be introduced in the coming months to further stabilize the economy. He reaffirmed the CBN’s commitment to making difficult decisions that prioritize the nation’s economic health over short-term convenience, noting that leadership in challenging times requires a firm commitment to long-term stability.