Everything To Know About CBN’s New Directives, Partnership With BDC, Others

Governor of the Central Bank of Nigeria (CBN), Olayemi Cardoso on Tuesday, chaired his first Monetary Policy Committee (MPC) meeting, disclosing fresh decisions for the Apex bank.

This is the first meeting since Cardoso came onboard as Governor in 2023, highlighting reasons for its new directives as well as  reassuring Nigerians of its dedication to strengthen the economy through these policies.

Everything To Know About CBN’s New Directives

MPR Interest Rate

The big elephant in the room is the increase in interest rate (22.75%) and cash reserve ratio(45%), which was announced in the meeting today.

Economist Opeoluwa noted that, Cardoso, through this policy hopes to increase leading rate, but also reduce the amount available to banks. It is expected that with increased interest rate, more liquidity will be mopped up hereby controlling inflation rate.

It will also help stabilize Naira by attracting FPIs.

Recall that CBN’s target inflation for this year is 21%, and an interest rate above the target sends enormous confidence to investors.

Fiscal collaboration :-

-While acknowledging the mere fact that some of the causes of inflation and the control thereof are beyond the monetary team, Cardoso reiterated his commitment to collaborate with the fiscal team.

-He talked about tax to GDP ratio of 30% needed by a nation undergoing development like Nigeria. Currently, the target of FIRS is 18%.

Opeoluwa asserts that an efficient tax system does not only help generate revenue for the government, it helps control inflation, pull domestic resources, ensure a competitive economy and increase economic growth.

The problem is, how Nigeria attain 30% tax to GDP ratio without reducing certain threshold to further increase the tax net and also increase tax rate? Ultimately, it may affect our competitiveness. But i am all for 30% tax to GDP ratio as long as the opportunity cost does not override perceived gains.

READ ALSO: Dollar To Naira Rate Today February 27, 2024

Forex

-The current reforms are working exemplified by recent $2 billion inflow into the market and foreign reserve shoring up to over $34 billion.

-CBN will also strive to complete the payment of genuine forex backlog in record time as another $400 million was paid today.

-Manipulation of our forex market will not be tolerated.

-Binance as announced last week, is working closely with the Federal Government. $26 billion passed through Binance (illicitly) over the last one year which can’t be traced.

– As announced earlier, Bureau De Change (BDC) operation is being reformed to bring sanity to the market. That is, the new policy of selling a maximum amount of $20,000 to licensed operators to in return, sell at most, 1  per cent increase from it’s initial buy will help stabilize the market flow and prices.

-There will be increased surveillance over the market and infractions will not be tolerated.

-Cardoso insist from all indication( both on the technical and soft side), naira is till undervalued.

Fiscal Intervention

Opeoluwa explains that the CBN is moving away from Direct Intervention as highlighted by Cardoso.

The previous CBN administration led by Godwin Emefiele had allegedly intervened with N10 trillion ( beside ways and means) and this is reportedly largely responsible for the damaged economy.

Cardoso concludes telling Nigerians that this current CBN is not responsible for the woes faced by Nigerians.

He insist that they are part of the solutions. He acknowledges he is in a position of trust and promised to not betray that trust.