Market News

BY Clem Aguiyi

In some of the episodes in this column, I have made a few common-sense predictions that have come to pass and suggestions that were implemented by the apex bank.

The reality of those suggestions becoming actionable policies served as a tonic and motivation for me to further put the Central Bank of Nigeria (CBN) in focus and its Governor, Olayemi Cardoso, whom I had not met but have developed a personal interest in, due to his visionary leadership. Someday, I would like to meet and greet him.

A thank you and words of encouragement will be in order. In my estimation, he is one of the shining stars and new revelations of President Bola Tinubu’s administration. Whether we can trust him and his team with the monetary policy is no longer in question.

He has shown rare courage, visionary and strategic thinking, and independence devoid of political consideration in executing difficult tasks that align with the vision of the current administration to ensure economic growth. His economic expertise, analytical skills, adaptability, strong leadership traits, and ability to communicate the bank’s policies clearly to stakeholders and the public stand him out.

His integrity and credibility as a leader and proactive approach to identifying potential risks and implementing appropriate measures collectively contribute to effective governance of the Central Bank, helping to ensure monetary stability and support economic growth.

In a particular episode, I lamented that the apex bank has become a toothless bull-dog. I urged the bank to execute what I called the “3Bs” – ‘Bark and Bite the Banks’ – if it must stabilise the economy and pull the naira from the brink. For too long, Deposit Money Banks (DMBs) have taken Nigeria for a ride due to their insatiable risk appetite thereby sabotaging the monetary policy and causing attendant economic woes.

I reckon that for the economy to turn the curve, DMBs must sit up and serve as partners in progress with the CBN and not a destabilising agent. I argued that CBN must make the banks understand that her regulations are meant to be obeyed; otherwise there will be severe consequences.

The DMBs can get sanctioned either as corporate bodies or individual directors for economic crimes. I submitted that 70% of our economic woes are inflicted by the uncontrolled risk appetites of banks, which would rather choose a slap on the wrist than comply with regulations.

Even though the prescribed sanctions for violations were small, the regulators were often unwilling to wield the stick. Why? For many years the DMBs, under the Bankers Forum, infiltrated the CBN and hijacked the soul of the apex bank. In the breach, all known rules were observed, and their compliance at zero level.

In that episode, I highlighted that self-regulation, which is a post-modernist proposition of social scientists backed by bankers, has failed. A serial violator with no respect for rules and no fear of consequence will not comply with the law particularly where the regulator is a willing collaborator. The proponents of self-regulation assume that bankers who prefer profiteering will be able to monitor their adherence to legal, ethical, or professional standards rather than have an outside independent agency oversight them.

That may work elsewhere but not in Nigeria. I am still searching for the data for the number of DMBs that were penalised by the Bankers Forum for monetary policy violations. Monetary policy rules mean nothing when they are neither respected nor obeyed. Therefore, CBN must police the banks or they will continue to sabotage the economy. It is therefore cheering to find CBN summoning the courage to bite DMBs.

The apex bank imposed a fine of N150 million on major DMBs in Nigeria which will be deducted from their deposit with the Central Bank. Weeks later CBN doubled down and placed another round of sanctions on DMBs engaged in illegal and fraudulent transactions. CBN has finally woken up. Since December 2024, when it wielded the sticks on the banks and followed sustained reforms, the naira has appreciated in the official market.

At the time of writing this article, the naira was trading at N1, 474 to the dollar. Data from the official FMDQ Securities Exchange trading platform revealed that the Naira gained almost N64 between December 2024 and the end of January 2025, its strongest in one year.

According to Cardoso who pledged to sustain continued cash flow and tighter monetary policy, the naira’s strengthening may decrease inflation from 25 to 15% in 2025. Under Cardoso, the CBN has implemented a series of bold reforms aimed at stabilising the naira which has faced significant volatility in recent years.

These reforms are designed to enhance the Foreign Exchange (FX) Market efficiency. Many economists already forecast that a strong and stable naira has the potential to attract foreign investments. And ultimately restore confidence in the currency and decrease inflation.