Nigerian central bank Governor Olayemi Cardoso has highlighted a significant increase in dollar liquidity in the country’s currency market, attributing it to recent reforms and signaling positive outcomes. Transaction volumes reached $844 million on Feb. 5, a notable milestone that reflects the success of these reforms, according to Cardoso’s remarks to Nigerian lawmakers in Abuja.
The surge in dollar liquidity comes amid a 37% depreciation of the naira against the dollar since Jan. 26, following measures by the central bank aimed at aligning its value with the street rate. This strategy is part of a broader initiative to unify Nigeria’s official and unofficial foreign exchange markets, aiming to enhance investment opportunities in the country.
The scarcity of dollars in the domestic market has long been a challenge, contributing to the weakness of the currency. To address this issue, the central bank has encouraged Nigerians living abroad to repatriate their funds through official channels, leading to improved liquidity levels.
Cardoso expressed optimism about the ongoing reforms, describing the current situation as a turning point. He emphasized the emergence of positive outcomes and anticipated further improvements in the near future, reflecting confidence in the effectiveness of the measures implemented by the central bank.
Nigerian President Bola Tinubu’s decision to ease currency controls and eliminate fuel subsidies upon taking office in May has been pivotal in driving economic growth. While these measures have been welcomed by international investors, they have also led to challenges domestically, including a significant rise in inflation, reaching nearly a three-decade high of 28.9% in December.
Looking ahead, Cardoso expects a decline in price pressures throughout 2024, driven by the central bank’s commitment to targeting lower inflation and restoring orthodox monetary policy practices. Finance Minister Wale Edun echoed this sentiment, emphasizing the significant progress made by Nigeria following the implementation of the reforms.
Despite the challenges faced in the past, both Cardoso and Edun expressed confidence in Nigeria’s economic trajectory, highlighting the country’s resilience and potential for growth. As the nation continues to navigate through these reforms, there is optimism that Nigeria’s finances are on the mend, paving the way for a brighter economic future.
