he Central Bank of Nigeria (CBN) has blamed the foreign exchange market’s instability on “seasonal demands”.
CBN Governor Olayemi Cardoso revealed this on Tuesday during the 295th Monetary Policy Committee (MPC) of the federal bank in Abuja, when the MPC raised interest rates from 24.75 percent to 26.25 percent.
“Members further observe the recent volatility in the foreign exchange market attributing this to seasonal demand, a reflection of the interplay between demand and supply in a freely, functioning market system,” Cardoso said.
The Nigerian currency has experienced an unprecedented volatility in the last one year since the assumption of President Bola Tinubu. The Naira, which was around N700/1$ in May 2023, descended to an all-time low of about N1,900/1$ in February 2024 before it climbed in April to about N1,100/$1 and then embarked on a sudden descent to N1,600/$1 in May 2024.
The apex bank chief, who blamed the instability on seasonal demands, said “there is light at the end of the tunnel”, adding that “the tools that the CBN is using is working” and “we are beginning to get some reliefs”.
Cardoso also said the MPC noted a marginal increase in the external reserve balance of the country.
“The committee also noted the marginal increase in the external reserve balance between March and April 2024 and urged the balance to sustain its focus on accretion to reserve,” he said.
He said foreign flows represent about 6% of Nigeria’s Gross domestic product (GDP) and the “our target of course is to double the remittance flow within the year, and of course, we have started that process of engaging to ensure that this happens”.
Cardoso said the CBN won’t hesitate to adopt “tighter regulation and technology” if the need arises. In March, the CBN said the economy recorded over $1.5 billion in FX inflow.
The apex bank chief further said, “The MPC commended the bank for its recent approval of 14 International Money Transfer Operators (IMTO). This is expected to improve competition and lower the cost of transactions thus attracting more remittances through formal channels.”
Cardoso said the IMTOs responded very positively on the issues of the price, the commission and the charges that they are having to pay. “They are encouraged to use the official (rate) channels to advance the course of the very laudable efforts that they are making to enhance the inflows of the foreign currencies coming in,” he said.
He added that the committee also noted that the banking system remained safe and sound despite the headwinds confronting the economy.