… Cardoso’s biggest headache will be how to reduce the N2.1trillion in the banking system–OpeBee
The new governor of the Central Bank of Nigeria CBN, Dr. Olayemi Cardoso on Tuesday during screening by the Senate dismissed fears over the independence of the apex bank, saying he will try as much as possible to maintain it’s independence
On the independence of CBN, the governor was very vocal and tried to dispel any fears on the issue. He said he would ensure CBN’s independence while also respecting the oversight functions of the executive and Senate.
He also assured the legislators that CBN will fully comply with the CBN Act and will always make himself available to the Senate if the need arises.
On Forex issue: he alluded to two major problems that can help solve the current problem and increase inflow in the short term. One being, the forex owed by the CBN( operational problem) and also the other being systematic policies governing forex management.
He promised to sort out the debt as soon as the claims are verified. He also promised to bring out holistic policies to help govern forex management.
On inflation: He named the causes of inflation and also talked about energy issues (fuel importation), shortage of food produce ( be it artificial or quantitative ) and Deficit financing( budget deficit) leading to excess money in circulation.
On the co-mingling of Fiscal policy and monetary policy, he said CBN will play just an advisory role and help serve as a conduit for implementation. Unlike what was obtainable in the past, where CBN was the one to initiate fiscal policies and implement ( e.g Anchor borrowers program), He promised that the Finance Ministry will initiate the policies and mobilize funds( although funds can be through CBN) while CBN will play an advisory role and help to disburse the funds, monitor and evaluate progress.
Other highlights -: He talked about potentially rebasing the economy after financial inclusion of the informal sector. He talked about strengthening the data infrastructure of the CBN to help CBN make better decisions. He talked about carrying stakeholders along and getting feedback
Applauding the CBN governor for his explanation about the cause of inflation on his X (Twitter) handle, a financial analyst known as@ OpeBee, said: “Let me touch on the last point of deficit financing. I remember I did a thread months ago highlighting the dangers of cyclical budget deficit. I argued that for Nigeria to have low inflation we need naira stability and for naira to be stable we need a balanced budget at the very least. I buttressed my points with verifiable data that showed the relationship between budget deficit in Nigeria and high inflation. I recommended that PBAT pursue a holistic approach to our fiscal issues. We must ensure to make whatever money we wish to spend. I am happy Cardoso seem to be on the same page. After running cyclical budget deficit funded by ways and means here is the result -: we have N4.6 trillion “chasing” dollars, Out of which N2.2 trillion is outside the banking system and beyond CBN and monetary policy control. Cardoso biggest headache must be how to reduce the N2.4 trillion within the banking system while also recouping most of the N2.2 trillion outside the banking system. I know Nigerians don’t want to hear this but this is where the naira redesign policy comes in.”
Will Cardoso be bold enough to initiate another naira redesign policy albeit in a seamless manner?
Other tools to reduce money in circulation like selling securities and hiking interest rates may only help reduce money within the banking system, how do we deal with the N2.2 trillion outside the banking system, he asked.
On the co-mingling of Fiscal policy and monetary policy, the CBN governor said the apex bank will play just an advisory role and help serve as a conduit for implementation. Unlike what was obtainable in the past, where CBN was the one to initiate fiscal policies and implement ( e.g Anchor borrowers program), he promised that the Finance Ministry will initiate the policies and mobilize funds( although funds can be through CBN) while CBN will play an advisory role and help to disburse the funds, monitor and evaluate progress.
Other highlights -: He talked about potentially rebasing the economy after the financial inclusion of the informal sector. He talked about strengthening the data infrastructure of the CBN to help CBN make better decisions. He talked about carrying stakeholders along and getting feedback
He however described the screening exercise as a modest outing.
“In my honest opinion, it was a modest outing. The senators once again betrayed the expectations of Nigerians with the type of questions asked and the manner in which they were asked.
If there was a time to really grill an appointee on substance, Tuesday was the day, but our senators said NO.
