The Governor of the Central Bank of Nigeria (CBN), Mr. Olayemi Cardoso, emphasized that the Bank’s implementation of the Electronic Foreign Exchange Matching System (EFEMS) stems from the fundamental belief that trust is vital in central banking. Speaking to members of the Harvard Club of Nigeria in Lagos, Cardoso addressed the theme of “Leadership in Challenging Times: Restoring Credibility, Building Trust, and Containing Inflation,” highlighting the need for transparency and effective oversight in foreign exchange transactions.
“Trust is the currency of central banking,” he stated, underscoring that public confidence is crucial for the success of the Bank’s policies. He explained that the introduction of EFEMS aims to enhance transparency and oversight, signaling the CBN’s commitment to fostering fair and efficient markets.
Reflecting on his first year in office, Cardoso noted that leading a central bank often involves making tough and sometimes unpopular decisions. He reassured his audience that the CBN values feedback and is open to revising its strategies when necessary. He emphasized the importance of focusing on core objectives: restoring the institution’s credibility, building trust in the financial system, and effectively managing inflation—goals he deemed essential for meaningful economic recovery.
Cardoso recounted his understanding that the CBN’s credibility had to underpin all actions taken by his team upon his appointment. He remarked, “Without credibility, no policy, however well-intentioned, can succeed.” He defended the decision to float the naira, despite public criticism, as essential for aligning the official exchange rate with market realities. The existing gap between official and parallel rates had fueled speculation and diminished trust in the market.
“Credibility is earned by consistency,” he added, noting that the decision to close this gap, while challenging in the short term, reinforced the CBN’s dedication to transparency and sound monetary policy. This move has helped to reduce speculative trading and stabilize currency markets.
While acknowledging that the CBN has yet to meet its inflation targets, Cardoso highlighted recent declines reported by the National Bureau of Statistics (NBS) in July and August 2024 as positive signs that the Bank is on the right track. He elaborated on the rationale behind raising the Monetary Policy Rate (MPR) to 27.25%, describing it as a bold but necessary step to control inflation by reducing excess money in circulation.
Cardoso offered several key leadership insights, emphasizing the importance of focusing on the CBN’s core mandate—price stability. He warned against the temptation to undertake too many initiatives, which can distract from essential objectives. “Effective communication is as crucial as the right policy,” he stated, stressing that transparency fosters trust. By consistently providing updates on economic data and the results of the Dutch Auction, the CBN aims to reinforce public confidence in its actions.
In closing, Cardoso asserted that trust in the central bank hinges on its commitment to taking necessary steps for economic stability, even when those steps are uncomfortable or politically challenging.
Written By; Christopher Emuakpeje