With the right policy measures, Nigeria can overcome macroeconomy challenges, says Cardoso
Adopting the right policy measures, the governor, Central Bank of Nigeria (CBN), Mr. Olayemi Cardoso on Friday evening said Nigeria can overcome macroeconomy challenges and pave the way for progress and prosperity.
Cardoso speaking to the banking community at the 58th annual Bankers’ Dinner and 60th Anniversary.of the Chartered Institute of Bankers of Nigeria (CIBN) in Lagos, highlighted these challenges to include rising inflation, inadequate foreign exchange supply, depreciation of the exchange rate, limited external reserves, weakened output, and high unemployment.
He expressed confidence and optimism that by taking appropriate corrective actions and strategic steps, the CBN can restore macroeconomic stability and address fundamental flaws.
He stated that the President Bola Tinubu subsidy removal and adoption of floating exchange rare, among others have positive effects on the economy in the medium-term
According to him, “The removal of petrol subsidy and the adoption of a floating exchange rate, among other government policies, are anticipated to have positive effects on the economy in the medium-term. These measures are expected to enhance investor confidence, attract capital inflows, stimulate domestic investment, and ultimately improve the level of external reserves. Additionally, they are expected to contribute to the stabilization of the domestic currency.”
He stated that despite the challenging global and domestic macroeconomic environment, Nigeria’s financial sector has demonstrated resilience in 2023, with key indicators of financial soundness largely meeting regulatory benchmarks.
“Stress tests conducted on the banking industry also indicate its strength under mild-to-moderate scenarios of sustained economic and financial stress, although there is room for further strengthening and enhancing resilience to shocks.
“Therefore, there is still much work to be done in fortifying the industry for future challenge.”
He said the current administration has outlined in the widely circulated Policy Advisory Council report on the national economy and has set an ambitious goal of achieving a Gross Domestic Product (GDP) of $1.0 trillion over the next seven years, with clearly defined priority areas and strategies.
According to him, “Attaining this substantial target necessitates sustainable and inclusive economic growth at a significantly higher pace than current levels. The administration has already commenced this journey through fiscal reforms, including the removal of petrol subsidy and the unification of the foreign exchange market rate.
“Considering the policy imperatives and the projected economic growth, it is crucial for us to evaluate the adequacy of our banking industry to serve the envisioned larger economy. It is not just about the stability of the financial system in the present moment, as we have already established that the current assessment shows stability. However, we need to ask ourselves: Will Nigerian banks have sufficient capital relative to the financial system’s needs in servicing a $1.0 trillion economy in the near future?
‘In my opinion, the answer is “No!” unless we take action. Therefore, we must make difficult decisions regarding capital adequacy. As a first step, we will be directing banks to increase their capital.”
He stated that technology would continue to play a critical role in delivering financial services and enhancing financial inclusion, stressing that the recent developments in the payment services landscape have raised concerns regarding the use of technology and the existing licensing and regulatory framework.
He disclosed that some licensees are operating outside the approved activities, breaching the boundaries set for them.
“Any intentional or unintended noncompliance will be subject to sanctions, as operators have the responsibility to ensure that they are licensed for the activities they undertake,” the CBN said.
