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(Bloomberg) — Central Bank of Nigeria Governor Olayemi Cardoso said inflation will moderate this year and described the country’s naira currency as “undervalued,” in his first public comments on the economy since November.
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“Inflationary pressures are expected to decline in 2024 due to the CBN’s inflation-targeting policy, which aims to rein in inflation to 21.4%,” Cardoso told an event Wednesday hosted by the Nigerian Economic Summit Group.
“The prospect of lower inflation in 2024 will have a profound impact on businesses, creating a more predictable rate environment and potentially leading to lower policy rates, boosting investment, driving expansion, and creating job opportunities,” he said via video link.
Cardoso raised top expectations in a November speech in which he promised sweeping reforms, adding a shift toward inflation targeting rather than an attempt to increase the supply of cash. But he remained largely silent in public until Wednesday’s speech, earning him complaints about his lack of cash. communication.
The central bank is expected to raise interest rates sharply when it meets next month. The gathering, which was only scheduled last week, will mark the first time the monetary policy committee has convened since July, when it raised rates to 18.75%.
Since then, inflation has accelerated and stood at 28. 9% in December, its highest point in three decades.
Africa’s most populous country is grappling with a cost-of-living crisis fueled by reforms that boosted growth last year. The measures, led by the easing of the country’s exchange rate and the elimination of fuel subsidies, were welcomed by foreign investors, although difficulties at the domestic level point and caused a sharp fall in the currency.
“Lately, the naira has been undervalued,” Cardoso said. And together with coordinated fiscal measures, we will drive real value discovery in the near term. “
The currency has fallen about 50% against the dollar since President Bola Tinubu relaxed Nigeria’s foreign-exchange regime shortly after he took office in May.
The move ended years of trying to manage the currency, discouraging foreign investment while not prevent a flourishing unofficial market where the naira changed hands much more cheaply against the dollar.
Although the unification of the two markets is considered to bring significant benefits in the long term, the process has not been straightforward so far due to the shortage of dollars in the domestic market.
Part of the challenge is the delay in asking corporations for dollars to repatriate the naira’s revenues, which the central bank is seeking to reimburse. Cardoso said that would continue.
“We are resolving the backlog in valid foreign exchange transactions,” he said. “In our efforts to stabilize the exchange rate, it is imperative to prioritize transparency and create a market environment that allows for fair determination of exchange rates. “
The country’s currency crime watchdog this week gave the green light to the Association of Exchange Offices of Nigeria to publicly publish online the exchange rates of the naira against the dollar.
The move reverses measures taken by previous central bank leaders towards foreign exchange houses and restricts the visibility of the unofficial market in a bid to shore up the official naira.
This resolution has brought the activity to the streets and into the shadows.
–With those of Helen Nyambura and Ana Monteiro.
(Updates with more comments from Cardoso in the paragraph. )
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