In the span of a year, Governor Cardoso has taken the helm at the Central Bank of Nigeria (CBN), navigating a landscape filled with both inherited challenges and notable accomplishments. His role transcends mere oversight of foreign exchange; it encompasses the formulation and execution of monetary policy, ensuring financial stability, managing reserves, regulating banking practices, and setting interest rates, among other crucial responsibilities. Reducing this multifaceted position to a single focus would be as misguided as a person attending to just one tooth out of a full set.
Governor Cardoso’s inaugural year has indeed been a blend of triumphs and trials, testing both his leadership acumen and the resilience of the institution. Among the pressing issues faced was a forex liquidity crisis, worsened by dwindling dollar inflows and a fluctuating naira. However, thanks to strategic reforms, the CBN recently announced a remarkable surge in remittance inflows, hitting an impressive $553 million in July 2024. This figure marks a staggering 130% increase compared to the same month in the previous year, reflecting the CBN’s ongoing efforts to bolster liquidity in the foreign exchange market.
Additionally, under Cardoso’s guidance, the CBN has made strides in combating the persistent inflation that has burdened the nation for years. By tightening monetary policy, the CBN has aimed to control the excessive money supply that fuels inflation. The Consumer Price Index (CPI) saw a decline to 32.15% in August 2024, down from 33.40% the previous month, a positive shift from the 26% inflation rate recorded in September 2023. This inflationary pressure has been a consequence of government decisions, including the removal of petrol subsidies, prompting the CBN to deploy all available monetary policy tools in its fight against rising prices.
Governor Cardoso has prioritized inflation control as a fundamental objective, viewing it as essential for achieving sustainable economic growth and enhancing the quality of life for everyday Nigerians. Over the past year, the CBN has embraced a robust monetary policy approach, which included raising interest rates to temper spending and investment, thereby cooling demand in the economy. The Monetary Policy Rate (MPR) was raised by 50 basis points to 26.75% in July, marking the fourth consecutive increase since February.
The introduction of an Inflation-Targeting framework under Cardoso’s leadership aims to stabilize price levels, mitigate currency fluctuations, and promote sustainable economic growth. The CBN has also enacted policies to bolster confidence in the Nigerian economy, attracting foreign investment and fostering business expansion. Improved communication and strategic actions have helped alleviate economic uncertainties, fostering trust among investors and the broader public.
Furthermore, the CBN has streamlined the forex market into a cohesive framework, enhancing liquidity and minimizing market distortions. The bank successfully cleared a backlog of $7 billion in valid forex requests, reduced volatility, and increased external reserves to $37.9 billion as of July 2024, up from $33.6 billion in October 2023.
A notable advancement has been the improved coordination between monetary and fiscal policies, exemplified by the development of the Fiscal and Monetary Policy Coordination Framework (FMPCF). This initiative aims to enhance collaboration between monetary and fiscal authorities for better economic management. The Financial Services Regulation Coordinating Committee (FSRCC) has also strengthened its operations through regular inter-agency meetings focused on critical issues such as cryptocurrency regulations and infrastructure financing.
In the past year, the CBN approved the establishment of a new bank as a non-operating financial holding company, while another transitioned from a merchant to a national commercial bank. Additionally, two banks received approvals for regional commercial licenses, and 16 microfinance banks were re-licensed from a previously revoked list.
In alignment with the current administration’s goal of achieving a $1 trillion economy by 2030, the CBN has emphasized the necessity for stronger, well-capitalized banks capable of meeting the demands of a rapidly growing economy. In March 2024, the CBN announced a hike in capital requirements for various banking licenses, with a deadline set for March 31, 2026, to ensure banks are adequately capitalized to support economic growth.
New licensing requirements and capital standards for Bureau De Change (BDC) institutions were also introduced to enhance forex distribution and oversight, with existing BDCs required to reapply for licenses under the new framework.
In terms of consumer protection, a comprehensive review of regulations was conducted to address emerging fintech risks and improve service standards. The CBN implemented a risk-based examination system to identify policy gaps and enhance conduct among financial institutions, while also addressing nearly 20,000 customer complaints over eight months.
To promote financial inclusion, the CBN introduced initiatives aimed at improving access to financial services for women-owned small and medium enterprises (SMEs) and enhanced financial literacy programs for youth. Cybersecurity measures were strengthened, including the adoption of ISO 27001 standards and the implementation of a risk-based Cybersecurity Framework.
The CBN’s regulatory reforms included adjustments to the Loan-to-Deposit Ratio and Cash Reserve Ratio, as well as interventions in governance issues within the banking sector. These steps have been pivotal in stabilizing the financial system.
Efforts to expedite Nigeria’s delisting from the Financial Action Task Force (FATF) Grey List have been intensified, with enhanced supervision of banks and guidelines for managing dormant accounts.
Overall, Governor Cardoso’s first year at the CBN has been characterized by significant strides toward economic stability, regulatory reforms, and a commitment to fostering a robust financial environment. The journey ahead remains challenging, but with continued focus and strategic initiatives, the CBN is poised to navigate the complexities of Nigeria’s economic landscape effectively.