. Says Naira is currently undervalued
By Stanley Onyeka
Nigeria’s Central Bank Governor, Olayemi Cardoso, yesterday, said the country’s economy is currently in the stabilisation phase, even as the Naira compared to other currencies at the foreign exchange (FX) market, is undervalued.
Mr. Cardoso, who spoke at the Nigeria Economic Summit’s Launch of the Outlook for the Nigerian Economy in 2024, said: “We believe that the naira is currently undervalued. And coupled with coordinated measures on the fiscal side, we will expedite genuine price discovery in the near term.”
“Investors, both local and foreign, as well as other stakeholders, can rest assured that the economy will transition to a new state of stability in the short to medium term as we recalibrate our policy tool kit and implement far-reaching measures.”
He noted that the Summit, themed: “Economic Transformation Roadmap: Medium-Term Policy Priorities,” resonates with the bank’s strategy, as the CBN is currently implementing a comprehensive strategy to improve FX liquidity in the short, medium, and long-term, which will bring about a change of fortunes.
The Governor assured of stability in the FX market this fiscal year due to a combination of factors.
“I am pleased to note our collaboration with the Ministry of finance and the NNPCL to ensure that all FX inflows are returned to the CBN. This coordinated effort will enhance the bank’s FX inflows and contribute to the growth of reserves.
“The expected stability in the FX market for 2024 can be attributed to the reduction in petroleum product import and the recent implementation of the market-determined exchange policy by the CBN. This reform is designed to streamline and reform multiple exchange rates.
Besides, he noted that the apex bank is clearing its backlog of FX transactions.
“In our efforts to stabilise the exchange rate, we must prioritise transparency and create a market environment that creates a fair determination of exchange rates ensuring stability for businesses and individuals alike.
“The resulting consistent and stable exchange rate will not only boost investors’ confidence but also attract foreign investment alleviating Nigeria’s appeal to global investors,” he said.
We believe that the naira is currently undervalued. And coupled with coordinated measures on the fiscal side, we will expedite genuine price discovery in the near term.
Inflationary pressures
Mr. Cardoso also expects current inflationary pressures to decline this year due to the CBN’s inflation-targeting policy, aimed at reining in inflation to below 21.4%.
“The outlook for decreasing inflation in 2024 will have a profound impact on businesses, providing a more predictable cost environment and potentially leading to lower policy rates, stimulating investment, fueling growth, and creating job opportunities,” he said.
He noted that the CBN’s adoption of the inflation targeting framework involves clear communication, use of monetary policy instruments, and collaboration with fiscal authorities to achieve price stability.
“This will be aided by improved agricultural productivity and the easing of global supply chain pressures benefitting businesses by boosting consumer confidence and purchasing power,” he added.
Mr. Cardoso, making his first public comments, projects the economy will grow by 3.76 per cent in 2024, underpinned by the implementation of key government reforms.
“Foremost among the factors contributing to this positive outlook is the expectation of improved crude oil prices and production, highlighting the crucial role the oil industry is expected to play in driving economic growth.”
This, he said, will also impact positively on other sectors including industry, services, agriculture, mining, electricity, gas, and water supply.
He continued: “The anticipated moderation in pump prices of PMS due to the expected operational state of the country’s three government’s refineries and private-owned refineries in 2024 is a pivotal factor in the economic situation.
“The economic stabilisation or reduction in fuel cost is poised to have far-reaching implications across various sectors contributing significantly to overall economic efficiency and resilience.”
