Cardoso faces tough test amid FX crisis, rising rates


The newly nominated Governor of the Central Bank of Nigeria, Yemi Cardoso, has to tackle the country’s foreign exchange shortage and the double-digit interest rate that hurts businesses. He also has a Herculean task of taming the accelerating inflation rate, writes SAMI OLATUNJI

The announcement of the nomination of Yemi Cardoso as the new governor of the Central Bank of Nigeria elicited excitement among market players. Cardoso, who will be the 11th CBN governor, if successfully confirmed by the Senate, is not just one of them; his capacity to manage the country’s monetary policies is unassailable.

He will succeed Godwin Emefiele, whose suspension and dramatic removal still raises legal questions. The nomination of the 66-year-old banker will revive the argument over whether bankers or economists make better central bank governors. Cardoso is a banker, who once served as chairman of Citibank Nigeria. However, some of Nigeria’s most celebrated CBN governors have been economists.

The main issues for Nigeria’s incoming CBN governor include addressing the foreign exchange crisis, the double-digit interest rate and putting under control the accelerating inflation, and unpaid intervention loans.


Emefiele’s challenges

In six years, the CBN has done poorly at controlling inflation, with last month’s inflation numbers reaching an 18-year high. Emefiele suggested that greedy middlemen were the drivers of high prices. His time as governor was notable for expanding loans to the Federal Government, CBN-funded agricultural schemes, and artificially pegged exchange rates.

Many of the policies Emefiele pursued as governor seemed to have the nod of former President Muhammedu Buhari, calling the bank’s independence into question. Emefiele was also criticised for a short-lived attempt to run for the Presidency while he was CBN governor. Observers have similar concerns about his successor, Cardoso.

The new CBN governor is a long-term associate of Tinubu. He was appointed Lagos State’s Commissioner for Budget and Economic Planning in 1999 but did not complete his tenure because he won the Michael Romer Memorial Scholarship. Some political pundits claimed that Cardoso could have been nominated as deputy governor of Lagos following Senator Bucknor Akerele’s exit if he had not taken up the scholarship. Instead, Femi Pedro became deputy governor.

Despite questions about partisanship, Cardoso’s accomplished career with Citibank and Citizens International Bank and his academic and professional accomplishments will give some hope that he may make a good CBN governor. But like Wale Edun, who was appointed finance minister, he may have to shake off claims that his appointment is a continuation of Tinubu’s emerging pattern of placing his old allies in strategic teams.

Tinubu also approved the nomination of four new deputy governors of the apex bank to serve for a similar duration of five years in the first instance, pending their confirmation by the Senate.

The nominees are Emem Usoro, Muhammad Abdullahi-Dattijo, Philip Ikeazor and Bala Bello. On her part, Mrs Usoro has over two decades of banking experience spanning retail, commercial, corporate banking and public sector, covering all the regions in the country. She was the Group General Manager and the Strategic Business Group. She was also the Regional Head of Lagos Bank 2, and has won multiple awards at the annual UBA CEO Awards. She is an alumna of Harvard Business School and Lagos Business School.

Abdullahi-Dattijo is a seasoned development economist with over two decades of experience in policy formulation, public finance, and project implementation. He is the former Kaduna Central Senatorial candidate of the APC in the 2023 elections. He has served in various high-level positions, including as a policy adviser at the Executive Office of the United Nations Secretary-General Ban Ki-Moon in New York.

Ikeazor has over 30 years of experience in the financial services industry. He has held various board positions, notably as the CEO of Keystone Bank Limited; CEO of Ecobank Kenya Limited; Executive Director, Union Bank Nigeria; Director of Union Bank UK PLC, and Director of the Orient Bank Uganda. He also served as a member of the governing board of the International Crop Research Institute for the Semi-Arid Tropics, India (a member of the World Bank-led Consultative Group on International Agric. Research). He has a BSc in Economics from the University of Buckingham UK and is an alumnus of the Wharton-CEIBS-IESE Business School Global CEO Programme and attended executive programmes at Harvard Business School and Wharton School of Business.

Bello is an industry leader who hails from Taraba State. His professional career has spanned banking, capital markets, and pension fund management. He is a well-respected public official and a renowned accountant. In April 2017, Bello was appointed by the immediate past President Muhammadu Buhari as the Executive Director of Corporate Services at the Nigerian Export-Import Bank.

FX crisis

The importance of the exchange rate as a major macroeconomic variable cannot be overemphasised. Countries earn forex through the production and export of goods and services. A country’s levels of forex and external reserves influence the strength of its currency.

 Over the years, the CBN has evolved and implemented different policy options to confront the country’s recurrent FX challenge, which sometimes degenerates into a crisis situation.

In 2016, there was an acute dollar shortage, which weakened the naira to a low of 530/ $1. CBN attributed the development to those hiding illegal money, people desperate to transfer illicit gains out of the country at any cost, and speculators.

The CBN has, over the years, maintained multiple exchange rates, which multilateral organisations kicked against.

The suspended CBN Governor, Godwin Emefiele, noted that the exchange rate regimes under him were to “preserve the value of the domestic currency and maintain a favourable external reserves position”. In a press report, Emefiele said that developing economies, including Nigeria, where demand for imports was high, needed to adopt an exchange rate regime that would “safeguard capital outflow and ring-fence the external reserves”.

The acting CBN Governor, Mr Folashodun Shonubi, adopted a unified and free-floating exchange rate determined by market forces. He abolished all segmentations and collapsed all FX windows into the Importers’ and Exporters’ windows.

The World Bank expressed support for the new exchange rate regime and noted that it was necessary to restore macroeconomic stability. But in the wake of the new FX regime, the naira plunged to an all-time low of 945/$1 at the parallel market as demand for the dollar far outweighed the supply. CBN noted that the development was not driven strictly by market forces of demand and supply but attributed it to the “unofficial diaspora remittances”.

Shonubi noted that many diaspora remittances were not covered officially and found their way to the black/parallel market.

However, despite all efforts and policies by the apex bank, the country still struggles with the FX crisis.

FTSE Russell, a subsidiary of the London Stock Exchange Group, recently reclassified Nigeria from frontier to unclassified market status. The demotion to unclassified market status resulted from the nation’s foreign exchange crisis. FTSE Russell said it would continue monitoring Nigeria, and once the foreign currency delays are cleared for a period of time, the country will be assessed as a new market in accordance with the FTSE Equity Country Classification Process.

It is expected that the incoming CBN governor and his deputies will have to address this crisis.


The CBN started its monetary policy tightening cycle in May 2022, with its benchmark interest rate from 11.5 per cent to 18.75 per cent in July this year. The bank justified this, noting that the rising rate of headline inflation necessitated the hike in interest rates.

The International Monetary Fund has advised the CBN to maintain its monetary policy-tightening mood in order to cage inflation, which had been on the rise.

However, different stakeholders have kicked against the constant tightening.

Earlier, the Director General of the Nigeria Employers’ Consultative Association, Mr Wale Oyerinde, said the increased Monetary Policy Rate implies higher borrowing.

He said, “Furthermore, the increased MPR implies higher borrowing rates, which would negatively affect companies and manufacturers that borrow capital for their survival. If unchecked, it could also lead to another form of economic quagmire as higher rates slow down productive activities.”

Also, President Bola Tinubu said interest rates needed to be reduced to increase investment and consumer purchasing in ways that sustain the economy at a higher level.

Inflation jumped to 25.80 per cent in August from 24.08 per cent in July, according to recent figures obtained from the National Bureau of Statistics, despite the constant tightening.

This has led to calls for other ways of managing inflation aside from tightening the MPR.

Unpaid loans

The CBN has released a number of loans as a form of intervention to make cash available to different sectors of the economy, especially the agricultural sector.

One of such intervention programmes is the Anchor Borrowers’ Programme.

While successes have been recorded in some places, the programme ran into a glitch due to the inability of some of the beneficiaries to repay the loan on maturity.

There are also allegations that some officials, who were saddled with the responsibility for dispensing the monies and farm inputs, diverted them.

It was learnt that over N1.1tn was disbursed by the CBN to the beneficiaries of the ABP since its inception, but only a little over N546bn was repaid.

The programme is currently being enmeshed in controversies, which compelled President Bola Tinubu to give a presidential order for the recovery of the loan.

With the directive by the President, it is expected that over N577bn would be recovered from defaulting farmers and officials who diverted the money.

The new CBN governor is expected to ensure that the loans are recovered with support from the security forces and other stakeholders.


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