By Mohammed Bello Doka
In its inaugural session under the leadership of Governor Olayemi Cardoso, the Central Bank of Nigeria (CBN) has announced sweeping changes to its monetary policy framework. The decision, reached during the Maiden Monetary Policy Committee (MPC) meeting, signifies a proactive approach to address prevailing economic challenges and steer the nation towards sustainable growth.
The adjustments come amidst a backdrop of economic uncertainty, exacerbated by global volatility and domestic challenges. With inflationary pressures mounting and exchange rate stability wavering, the CBN under Governor Cardoso's stewardship has embarked on a bold course to recalibrate monetary policy tools.
Key among the announced measures is a notable tightening of the Monetary Policy Rate (MPR), which has been raised by 400 basis points to 22.75%. This move aims to rein in inflationary pressures and restore confidence in the domestic currency. Additionally, adjustments to the asymmetric corridor surrounding the MPR, now standing at +100/-700 bps, provide a wider band for maneuvering within the monetary policy framework.
The decision to raise the Cash Reserve Requirement (CRR) from 32.5% to 45% reflects the CBN's commitment to liquidity management and financial stability. By increasing the reserves commercial banks must hold with the central bank, liquidity is tightened, curbing excess money supply and mitigating inflationary pressures. Meanwhile, maintaining the Liquidity ratio at 30% around the MPR ensures adequate liquidity in the financial system to support economic activities.
Governor Cardoso, in his address following the MPC meeting, expressed confidence in the ongoing reforms within the foreign exchange market. He foresees positive outcomes in the short to medium term, underpinned by improved market dynamics and enhanced transparency. Emphasizing the importance of collaboration with the fiscal sector, Governor Cardoso highlighted the need for synchronized efforts to stimulate economic growth and job creation.
Addressing concerns over the Bank's quasi-fiscal interventions in the agricultural sector, Governor Cardoso disclosed plans for a phased withdrawal from such activities. Instead, the focus will shift towards facilitating access to credit and promoting private sector participation in agriculture. This strategic shift reflects a broader commitment to market-driven solutions and a more sustainable approach to economic development.
In response to recent regulatory actions against Bureau de Change operators, Governor Cardoso clarified that these measures target unlicensed operators and speculative activities. By enforcing regulatory compliance and enhancing oversight, the CBN aims to foster a more stable and transparent foreign exchange market. Reaffirming the Bank's commitment to stability in the Nigerian Foreign Exchange Market (NFEM), Governor Cardoso assured stakeholders of the CBN's unwavering resolve to uphold trust and confidence.
Governor Olayemi Cardoso concluded his address by assuring prompt resolution of all pending verified requests, underscoring the CBN's commitment to stakeholder engagement and responsiveness. As the nation navigates through economic headwinds, the CBN, under Governor Cardoso's leadership, stands poised to enact prudent policies and bold reforms to ensure sustained economic stability and prosperity.
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