In a recent address to the Harvard Club of Nigeria in Lagos, Mr. Olayemi Cardoso, the Governor of the Central Bank of Nigeria (CBN), emphasized that the implementation of the Electronic Foreign Exchange Matching System (EFEMS) is based on the crucial role of trust in central banking. He explained that enhancing transparency and providing more accurate oversight of foreign exchange transactions is essential for restoring public confidence in the institution.
Mr. Cardoso articulated that trust serves as the foundational currency of central banking; without it, the effectiveness of policies diminishes significantly. He noted that the CBN is committed to creating fair and efficient markets through this system.
Reflecting on his first year in office, Mr. Cardoso highlighted that effective leadership at the helm of a central bank often necessitates making tough and occasionally unpopular decisions. He reassured his audience that the CBN is attentive to public feedback and willing to reassess its strategies if they do not achieve intended outcomes.
He stated that during challenging economic times, it is vital to concentrate on core objectives, such as restoring institutional credibility, building trust in the financial system, and, most importantly, containing inflation. These goals, he argued, are essential for meaningful economic recovery.
Recalling his early days in office, Mr. Cardoso stressed that the CBN’s credibility must underpin all actions taken by the institution. He pointed out that the decision to float the naira, while controversial, was essential to align the official exchange rate with market realities, thereby reducing arbitrage opportunities that had eroded trust in the financial system.
He remarked that credibility is achieved through consistency and that closing the gap between official and parallel rates was a painful but necessary step toward fostering transparency and sound monetary policy. As a result, speculative trading has diminished, and stability is slowly returning to currency markets.
While acknowledging that the CBN has yet to meet its inflation targets, Mr. Cardoso pointed to recent declines in inflation rates reported by the National Bureau of Statistics (NBS) as a sign that the central bank is making progress. He discussed the significance of raising the Monetary Policy Rate (MPR) to 27.25%, describing it as a difficult but necessary decision to manage excess money supply and curb inflation. He emphasized that leadership involves prioritizing long-term stability over short-term comfort.
Mr. Cardoso also shared key leadership insights, stating that navigating challenging times requires a focused approach. The CBN must remain dedicated to its primary mandate of ensuring price stability, despite external pressures. Effective communication, he asserted, is equally important as sound policy-making; transparent and consistent communication builds trust. By publicly sharing results and providing regular economic updates, the CBN aims to reassure the public that it is committed to ensuring economic stability, even in the face of difficult decisions.
Written by:Idu Sunita