The Governor of the Central Bank of Nigeria (CBN), Mr. Godwin Emefiele has said that tackling the problem of oil theft is critical to building robust foreign exchange reserves and achieving a stable naira exchange rate.
Mr. Emefiele stated this in a keynote address delivered at the annual Bankers Dinner Night of the Chartered Institute of Bankers of Nigeria, CIBN, where he also presented an outlook for the nation’s economy in 2023.
Mr. Emefiele also called on Nigerians to embrace the new naira notes, stressing that the decision to redesign the higher denomination notes is for a purpose which is in the overall interest of the country.
Among other things, the CBN Governor projected a decline in inflation rate below 15 per cent in 2023, and positive economic growth, saying, “Our policy stance will, accordingly, remain tight to curtail inflation pressure, regulate capital flows, and buoy the naira-dollar exchange rate.
“Monetary policy decisions will remain balanced, judicious, research driven, adequate and supportive of the real economy subject to underlying fundamentals.”
While highlighting efforts of the CBN to maintain exchange rate stability in 2022 in spite of the various challenges in the forex market, Mr. Emefiele stressed that the nation will be able to build robust external reserves and achieve exchange rate stability if the problem of oil theft is corrected
He said: “The current capital flow reversals from emerging markets are expected to continue to exert considerable pressure on market rates.
“This pressure could be amplified by the forthcoming elections, especially as the political marketplace heats up.
“Notwithstanding these pressures, the CBN is determined to maintain its stable exchange policy stance over the next few months through innovative policy measures to manage the demand and supply of foreign exchange.
“If the current problem of oil theft is promptly corrected, we could expect a resumed inflow of crude oil receipts into the official reserves. This could foster gross stability in the foreign exchange market and enhance exchange rate stability.”
On economic growth in 2023, the CBN Governor, said: “Based on the expectation of a robust non-oil performance, and barring any unforeseen shocks, GDP growth rate is projected to remain positive in the remaining quarter of 2022 and during 2023. The performance of the non-oil sector will be buoyed by the continued efforts at entrenching indigenous productivity in high-impact real sector activities.
“Domestic aggregate demand is further expected to be bolstered by the anticipated budgetary outlay and the surge of electioneering spending in the next few months.”
On the inflation trend in 2023, Mr. Emefiele said: “Inflation expectations are rising as existing structural rigidities are compounded by global factors and anticipated elections related liquidity upsurge.
“For the rest of 2022 and towards mid-2023 Nigeria’s rate of inflation is projected to remain elevated and above the 12.5 percent growth-aiding threshold. “However, on the backdrop of our previous policy measures, and as the effect continues to permeate the system, our inhouse model-based simulations indicate that inflation rate could fall steadily to less than 15 percent by end-2023.
While appealing to Nigerians to embrace the new naira notes, Mr. Emefiele said that the naira redesign policy is aimed at achieving specific purposes including curbing the upward inflationary trend in the country.
He said: “This policy will quicken the attainment of a cashless economy as it is complemented by increased minting of our eNaira. It will curtail currency outside the banking system and, as monetary policy becomes more efficacious, help to rein in inflation.
“Based on the ever-escalating challenges that are inundating currency management in Nigeria, with grim consequences for our sovereign integrity, the CBN recently announced its policy to issue newly redesigned Nigerian banknotes.
“Analysis of the key challenges primarily indicated a significant hoarding of banknotes, as over 85 percent of currency in circulation were held outside the banking system.
“Whilst the global best practice is to undertake currency redesign every 5–8 years, our existing banknotes have remained unchanged in almost two decades.
“It is therefore no longer tenable to continue with business as usual; especially given the continually evolving circumstances that could impinge the optimal performance of the Naira.”
