Market News

BY  Oluchi Chibuzor

The battle to put an end to the commoditisation of the Naira has become a critical issue that requires the support of all Nigerians. This is because of the dangers associated with currency commoditisation, especially the fact that it hinders economic growth and stability.

When a currency becomes a commodity, its value can fluctuate wildly based on speculative trading and investor sentiment. This volatility can disrupt businesses, discourage investment, and erode consumer confidence. The speculative nature of currency trading can create asset bubbles, leading to unsustainable economic growth and potential financial crises and implementing measures to curb excessive speculation and manage financial risks can help stabilise the currency.

The risks associated with this are significant. That is why in an attempt to curb the commoditisation of the Naira, Governor of the Central Bank of Nigeria (CBN), Mr. Oluyemi Cardoso, unfolded a strategic plan to address the situation and restore the  integrity of the Naira as a reliable national currency.

Cardoso disclosed this at the inaugural stakeholders’ conference hosted by the Committee of Heads of Banks Operations (CHBO) in Lagos over the weekend, with the theme, “Commoditisation of Naira: The Way Forward.”

In his keynote address, delivered by his Senior Special Adviser, Fatai Kareem, Cardoso noted that the commoditiation of the Naira poses a significant threat not only to the banking sector, but also to the daily lives of Nigerians who rely on the currency for transactions.

He described naira commoditisation as a process by which the national currency was being treated as a tradeable asset with its intrinsic national value being subjected to the principles of capitalism rather than being seen as a means of exchange for economic and items of value.

According to him, “The Naira is not merely a currency; it embodies our national identity. Its stability is vital for economic growth and development. Recent trends, however, have seen the Naira treated as a commodity rather than fulfilling its primary function as a medium of exchange. The commoditisation of the Naira, our national legal tender, has become a critical challenge for Nigeria’s financial ecosystem. t is a problem that not only affects the operations of the banking industry but also the lives of every Nigerian that relies on the currency for his day to day transactions.”

To the President of Chartered Institute of Bankers of Nigeria (CIBN), Prof. Pius Olanrewaju, three critical areas for consideration includes the need to create public awareness, leveraging more technology such as the fintech revolution to enhance the value of the currency and regulatory enforcement of existing laws.

Chairman of the Executive Committee of CHBO, Abraham Aziegbe attributed the commoditisation of the Naira to severe scarcity which led to its monetisation.

He noted that over the past two years, Nigerians have faced significant challenges due to cash shortages, leading to instances where citizens pay premiums for everyday transactions. This situation raises concerns about cash availability and potential hoarding practices among banks.

Under Cardoso’s leadership, confidence in the naira has returned as the apex bank has remained focused on ensuring stability.

“The confidence in the naira is gradually returning as a result of the policies that we are already undertaking, which goes back to the whole issue of Orthodox monetary policy, that is really what begins to encourage people to hold onto naira,” Cardoso said.

“Over a period of time, we believe that the confidence will continue to go up,” the CBN governor added.

The orthodox policies being implemented by the CBN have given confidence to the naira, which has elevated trust in the naira.

The CBN governor said the apex bank is putting out efforts to ensure stability in the exchange rate which has continued to fluctuate since the unification of the market segment last June.

“The CBN doesn’t determine the exchange rate. The fundamentals do. We will provide policies to make sure the policies are there in the market,” he said.

Cardoso is also focused on ensuring transparency and sanctioning those who would like to take advantage of the market.

Beyond the drive to curb the Naira commoditisation, Cardoso also recently unveiled two transformative initiatives aimed at improving payment turnaround time and streamlining document approval processes.

The launch of the Document Flow (DocFlow) System and the Ministries, Departments, and Agencies (MDAs) Naira Payment Solution marked a continuation of the bank’s digital revolution project tagged, “Digital First” which was flagged-off by the governor in December 2023 as one of his transformation initiatives.

Cardoso described the DocFlow system as a groundbreaking solution designed to revolutionise the apex bank’s document management processes by digitising documentation, minimising paper usage, and streamlining the approval processes.

On the other hand, he said the MDAs Naira Payment Solution, automates the cash withdrawal process for MDAs, enhancing efficiency in financial transactions and strengthening client support.

He also pledged his commitment to all initiatives of the bank aimed at enhancing service delivery, improve operational efficiency, and foster sustainability through technological advancements and expressed delight that the two solutions were fully developed in-house, thus saving a lot of costs.

To CBN Deputy Governor, Operations, Emem Usoro, the launch of the solutions demonstrated the bank’s desire for operational excellence through process automation and creating a culture of innovation that prioritises stakeholders’ satisfaction.

She further highlighted the benefit of the MDAs Naira Payment Solution to include improved service delivery to MDAs, while minimising errors, irregularities and mitigating against fraud. The project lead who is the acting CBN Director, Information Technology Department, Mrs. Jide-Samuel, said the MDA Cash Payment Solution had been successfully tested with some MDAs and aligns with the CBN’s enterprise objective of “Excellence in Central Banking Operations.”

The central bank noted that the MDAs Naira solution remained a game-changer in the CBN’s financial transaction management, which is projected to lead to a 70 percent improvement in payment turnaround time as well as boost the country’s financial ecosystem.

Under the one-year stewardship of Cardoso, the CBN has implemented a series of ground-breaking measures aimed at enhancing market transparency, improving financial stability, fostering a more secure investment environment, and shifting towards a market-driven exchange rate regime, to restore confidence and stabilise the economy.

From enhancing market transparency through restricting unearned income distribution to facilitating Nigeria’s delisting from the FATF Grey List, the CBN has demonstrated a steadfast commitment to strengthening the financial system.  The introduction of new guidelines for dormant accounts, the suspension of processing fees to encourage cash deposits, and the advanced use of Early Warning Systems further underscores the central bank’s dedication to promoting stability and trust within the financial sector.

There is therefore a need for all stakeholders and Nigerians to support the CBN in ensuring that the commoditisation of the naira stops to strengthen the nation’s currency, achieve stability and also engender economic growth.