The Central Bank of Nigeria (CBN) Governor, Olayemi Cardoso, has been commended for his bold reforms that have significantly impacted the country’s economy. According to The Democratic Front (TDF), Cardoso’s leadership has successfully managed inflationary pressure, volatile foreign exchange markets, and mounting debts ¹.
Key Reforms and Achievements:
– Interest Rate Hikes: Five rate hikes from 18.75% to 27.25% have stabilized the local currency and attracted investors.
– Forex Reforms: Transparency restored, arbitrage opportunities eliminated, and a huge backlog of forex obligations cleared.
– External Reserves: Increased to $38.9 billion from $33.6 billion in October 2023.
– Re-capitalisation Policy: Strengthened commercial banks’ liquidity base.
Economic Outlook:
The TDF believes that despite temporary hardships, Cardoso’s reforms will lead to long-term economic success. The economy is expected to regain its balance within the next year, making the current challenges a thing of the past.
Expert Endorsement:
Global economic experts and investors have praised Cardoso’s moves, citing the stability of the local currency under the free float regime as a key element in investment decision-making.
Call to Action:
The TDF urges Cardoso to continue his reforms, emphasizing that his role will significantly impact the success of the present administration’s economic reforms.
The statement reads:
We commend the efforts made so far by the Governor of Central Bank of Nigeria (CBN), Mr. Olayemi Cadoso, on the sweeping reforms he has courageously introduced in the implementation of monetary policies, which has significantly impacted on the current upward trajectory of Nigeria’s economy.
We state this position with due cognizance to the latest World Bank’s edition of the Nigeria Development Update (NDU), which identified Ways and Means financing of fiscal deficit, granting of large credits at subsidized rates, banning of access to Forex for importation of over 900 products, cost of maintaining an overvalued exchange rate, and unbudgeted fiscal deficits as the major policy missteps by the Federal Government between 2015 and 2023 which triggered the country’s inflation to a 28 years high from a single-digit to double-digits.
However, The Democratic Front (TDF) believes that circumstances behind fiscal and monetary policy deployment of the government within the period specified by the World Bank, can only be comprehended in appreciation of the negative factors that caused the global economic downturn of 2015-2021.
Indeed, we expect that the undeniable fact that the Nigerian government of 2015 inherited an empty treasury economy, which was mainly dependent on crude oil export for its revenue, and also traded in international crude oil sales at a low price of $26.68per/barrel, (lowest in 13 years) in January 2016, under a frustrating daily production of 500,000 barrel/bpd, should inform general perception and understanding of the enormous economic pressure and challenges under which that regime operated.
The tremendous loss in national revenue, occasioned by the global deep in crude oil price, sent the fragile monolithic oil economy into recession, leaving Nigeria with no option than to borrow for economic sustainability and development development of critical infrastructures in 2016.
Efforts by the government to exit from recession to the two zero points was hardly consolidated before the epidemiological breakout of COVID 19 in Wuhan, China unleashed an economic Tsunami on the world.
We equally note that no economy in the world anticipated the devastating effects of COVID 19 pandemic, as it triggered hyper inflation in the world’s most resilient economy, the United States, from 2% to a staggering 22%, just as it also eroded the gains of most developing economy in the world.
These unforseen human and global economic upheavals adversely affected our economy in a way that denied any pundit or institution of a reliable template to objectively assess the economic performance of the government of Nigeria between 2015 and 2022.
The encumbrances created by the COVID 19 pandemic to retard the global economy, was reminiscent of the great recession that gripped the Western European economies after the defeat of Nazi Germany in World War 2 in 1945.
Nigeria’s post-covid economy was a major victim of the global pandemic, as a significant chunk of its external borrowings, which had become the main source and projectile for economic and infrastructural development, was diverted to support failing businesses and households that were heavily pummelled by the prevailing harsh economic condition in country.
It is also pertinent for us to admit that the most terrifying flashpoint for a looming economic disaster, was when the Muhammadu Buhari administration was conscripted to borrow the staggering sum of N1 trillion to pay for petroleum subsidy in 2022. At this point, it was clear that Nigeria could no longer afford to subsidize any aspect of her economy. This stark economic reality prompted the Buhari regime to curtail the provision of petroleum subsidy to May 29th 2023.
The need to avoid the path to a replica of the Venezuelan economic tragedy necessitated President Bola Ahmed Tinubu’s sweeping reforms, which was aimed at deregulating the economy, and also reinventing a new fiscal and monetary system that will compete with global economic practices in self-sufficiency and self-sustainability.
Since his appointment as the apex bank governor, Yemi Cadoso has resonated the positive spirit of a hard working and focused Central Banker.
Under his leadership, the Monetary Policy Committee (MPC) has impressively implemented five interest rate hikes from 18.75% to 22.25%, and subsequently 24.75%, to 26.75% and a 50 basis point increase to 26.75% in July 2024. This move has been hailed by global economic experts and investors, as being responsible for the stability of the local currency under the free float regime. A key element in investment decision making by potential investors.
The Central Bank Governor has successfully managed the initial storm and turbulence of inflationary pressure, volatile foreign exchange market, mounting debts, and fears of financial inclusion, by introducing a slew of monetary reforms policies and actions that have restored transparency to foreign exchange transactions, and eliminated the arbitrage opportunities that hitherto plagued the system. He also cleared a huge backlog of forex obligations, and tremendously improved liquidity in the economy. This development is symbolically evident in the current level of Nigeria’s external reserve, which stands at $38.9 billion as against $33.6 billion in October 2023.
Cadoso’s leadership of the Central Bank has instructively made the Naira one of the most competitive currencies in the world.
The TDF strongly believes that the present cheap value of the Naira against the dollar, coupled with the temporary hardship and pressure it has brought upon consumers in the country, was unavoidably necessary for the long term economic reform of the Tinubu administration to succeed. We are however confident that the economy will soon regain its full ballance and grip, and the current hardship will be a thing of the past in the next one year.
Furthermore, we note that Olayemi Cadoso’s re-capitalisation policy in the Central Bank has further strengthened the liquidity base of the commercial banks. In all of these, we are happy to observe that the first objective of the economic reforms of the present administration to pull Nigeria back from the brink of fiscal collapse, like it happened to the Venezuelan subsidized oil economy, has been achieved.
We therefore urge Mr. Olayemi Cadoso to continue in the direction he is currently headed. Because his role as the head of the apex bank will go a long way to determine the success or otherwise of the present reform. And we cannot afford to fail the President and the nation.
Signed
Danjuma Muhammad
Chairman.
Wale Adedayo
Secretary.
