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Naira Panic Is Over, Nigerian Central Bank’s Cardoso Says - BLOOMBERG
Don’t panic. Anymore.
Olayemi Cardoso is pleased with how a rescue job on the Nigerian naira is going. Efforts to revive confidence in the currency seem to be working and the “worst is over,” the central bank chief said in an interview in London.
June has been a month of relative stability, marked by the naira’s smallest 100-day swings since January. That’s despite the inflation rate inching to a 28-year high in May — although an easing in the pace of acceleration suggests it may be nearing a peak.
Since his appointment in September, Cardoso has overseen the liberalization of Nigeria’s exchange rate and steep interest-rate hikes. The naira has slid about 70% against the dollar since June 1 last year, just after President Bola Tinubu took office. That’s brought it closer to the street price and hit consumers hard.
Yet, the reforms are beginning to bring rewards, with dollar inflows reducing buyers’ needs to load up on foreign currency, and that has curbed price distortions. The new-found calm is welcome but needs to last so that companies that have endured months of uncertainty can plan ahead.
There is some reason for optimism.
The government has hinted tariffs will be removed on certain imported food to help drive prices down. Last month, it got a $925 million loan from Afreximbank to boost the supply of hard currency on the local foreign-exchange market and the World Bank has approved $2.25 billion funding to support the economy.
Still, revenues need to increase and long-promised tax reforms are yet to be implemented, while Cardoso has other fires to extinguish.
A bill in parliament proposing to change the central bank’s law threatens its independence. It “might not stand the smell of best practice,” the governor said.
A return to the unorthodox policies of his predecessor, especially the so-called Ways and Means borrowing – were flatly ruled out.
The former commercial banker believes the naira is undervalued and still has room to strengthen. But, for now, Cardoso is enjoying a mini-victory.
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