Is Nigerian Market Viable for Foreign Investors with the Current Inflation?

Indeed, this is a rhetorical question that could only be answered by time and foreign portfolio investors as they show renewed interest in the Nigerian market. This new development was disclosed by the Governor of the Central Bank of Nigeria (CBN), Yemi Cardoso, during an exclusive interview with Arise Television.

The governor of CBN believes that the new development might be a potential turning point in the country’s financial market attractiveness. Cardoso also believes that irrespective of the opportunities, certain issues need to be addressed to further encourage and boost the confidence of foreign investors.

To address this, Olayemi Cardoso said that the apex bank has put measures and policies that would create a transparent market system that will increase liquidity and inflow into the Foreign Exchange market, therefore, bringing about a vibrant forex market in Nigeria.

During his interview, he highlighted some of the critical issues related to foreign exchange stability and monetary policy in Nigeria. He also mentioned some of the current priorities and actions being put in place by CBN to stabilize Nigeria’s economy and currency​​​​.

Here are some of the actions being implemented:

FX Obligations:

The CBN inherited $7 billion in unpaid forex obligations. To ascertain it, CBN conducted a forensic audit which indicated that approximately $2.4 billion of the claims had issues.

This includes cases where entities lacked legitimate import documentation, ghost entities receiving allocations, and cases where people received more than the foreign exchange they asked for or were given allocations without asking for any. Out of the claims, CBN has cleared $2.3 billion of legitimate claims. This includes airline claims. The CBN is certain it will take care of the remaining $2.2 billion very soon.

Naira Stabilisation and Investors’ Interest

Notwithstanding the difficulties, the Governor expressed optimism that the Naira will stabilize as reforms and corrective actions are put into place. Ongoing reforms, such as guidelines for international money transfer operators and the circular on banks’ Net Open Position (NOP), are anticipated to promote stability in the foreign exchange market.

Additionally, the interview revealed a growing number of foreign portfolio investors’ interest in the Nigerian market, which is regarded as a positive indicator for the country’s economy.

Overpopulation of CBN’s Office

Cardoso addressed the issue of congestion at the CBN headquarters, stating that the bank was in the process of reorganizing its internal arrangements for administrative convenience and efficiency. This reorganization is considered essential to solve the issues caused by overcrowding and to improve overall service.

Monetary Policy Committee (MPC) Meeting

Governor Cardoso stated that he is focused on making sure the MPC has an impact and supports the fiscal side of the economy. 

He stated that the MPC’s course is in line with the CBN’s redoubled emphasis on stabilizing prices and reducing inflation, which reflects the central bank’s new focus and fundamental mandate.

CBN Interventions

While Governor Cardoso recognized the value of interventions in providing resources to the underprivileged, he also underlined the need for an appropriate structure to guarantee that the intended recipients of these interventions receive them.

To avoid the mistakes made by previous interventions and guarantee that resources are allocated efficiently and to the appropriate individuals, the CBN intends to concentrate on its core competencies and work closely with organizations that possess experience in intervention domains.

NNPC and Foreign Exchange Liquidity

As a step in the right direction and one that will inspire trust, Governor Cardoso emphasized the recent decision to transfer the funds from the NNPC and other government agencies to the Central Bank of Nigeria (CBN).

The CBN hopes to strengthen the overall financial system and improve economic stability by involving major state-owned entities like the NNPC in these reforms. According to external observers, this is the right step which will help create a more transparent market system and increase foreign exchange inflow.

CBN’s Communication Channel

The Governor emphasized the optimistic outlook provided by global ratings and the anticipated decline in inflation by the end of the year as a result of current economic policies. He also discussed updating the CBN’s communication strategy and engaging with stakeholders.

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