The governor of the Central Bank of Nigeria, Olayemi Cardoso, has said that the apex bank has created policies that are focused on creating a transparent market system that will increase liquidity and inflow into the Foreign Exchange market, therefore, bringing about a vibrant forex market in Nigeria.
The CBN governor, in an exclusive interview with ARISE NEWS Business Anchor and Correspondent, Boason Omofaye, also denied reports that the federal government planned to convert domiciliary accounts of Nigerians to naira accounts as part of the reforms to stabilise the local currency.
Speaking on the reforms and policies that the CBN is implementing to stabilise the naira, he said, “We have been in a situation in the recent past where there’s been a shortage in liquidity in the foreign exchange market arising from certain distortions. And that in itself has created a situation where there has been huge volatility in the market. We have looked at this over the course of the past month and come up with certain policies which are focused on creating an environment where liquidity comes back to the market and where we can see a more vibrant market than we had before.
“Ultimately, I see a situation where people who require foreign exchange don’t have to know anybody in the banks. Neither the Central Bank or the commercial banks. A system that is open and is transparent creates an environment for distortions to go away. And thereby, those who want to bring in foreign exchange and those who want to demand it can do so on an open basis, willing buyer, willing seller basis. And therefore, the market becomes more active, and price is eventually discovered at a level that makes sense.”
The governor then spoke on the ways the bank plans to increase inflow of forex as he said, “Our focus has been to start looking very aggressively at the supply side of the chain, and some of the things we’ve done, for example, we have looked at the issue of the net open position of banks, and are of the view that good number of the banks have no business holding the number of foreign exchange that they have held, they have absolutely no business doing that for the quantum and for the period that they’ve held it for.
“That certainly does not encourage a vibrant market, and for that reason, we have asked them to sell their positions to customers with the hopes that that will begin to rekindle supply into the market and be able to satisfy the demands of many businesses in the economy rather than holding on to it. Easily, trading can take place in such a situation in and out rather than holding on to it, and of course, making gains of an astronomical amount as at when the foreign exchange rate goes in an upward direction.
He then revealed that most of the IMTOs activities are not conducted within the official market as he said, “The other thing that we have also done is the International Money Transfers, IMTOs. Up till this point in time, we know that a lot of activity has been undertaken by IMTOs, and sadly, we find a situation where very little of that has come through the official channels. It’s all been done in various forms that do not advance the cause of an open market. So, for that reason, in conversation with them, we came up with certain rules and regulations which we believe would be positive in the direction of encouraging them to now come into the formal market to undertake their activities rather than doing it out of the official market.”
Cardoso then reiterated the need for a transparent market as he explained, “In all these, we believe that the market must be very transparent. The rates must be out there, everybody should know the rules of the game. That way, people don’t get caught unawares. I think that is another very critical market that we are sending out to the market, and we in our role as regulators, frankly, we are significantly improving and taking up surveillance activities to ensure that the markets work the way they are meant to work and that all the players play by the rules, and that there is no room for any infractions and it’s compliance all the way. Those may seem basic, but they are fundamental in our view to the proper functioning of any long-term foreign exchange market.”
Cardoso then addressed the reports that the federal government planned to convert domiciliary accounts in Nigerian banks to naira accounts, saying that they were completely false.
He said, “As the governor of the Central Bank, I can tell you that nothing could be further than the truth. The reforms that you have seen in the past months which have obviously culminated in the Naira exchange for becoming a little less volatile, and ultimately will be stable, has had to embrace markets reforms and a situation where there is free entry and free exit. Attaching domiciliary accounts goes against the grain of that philosophy.”
He further assured Nigerians saying, “We certainly wouldn’t do anything like that.”