Cardoso’s Impactful Monetary Policy: One Year In Office
“Through a targeted policy, transparent market operations, and coordination between monetary and fiscal authorities, we can ensure a more stable exchange rate, control inflation, and create an environment for businesses and individuals to thrive – Olayemi Cardoso
These were the words of the Governor, Central Bank of Nigeria {CBN}, Olayemi Cardoso. But whether he has lived up to his words within the past year in office is a mixed bag of opinions among Nigerians.
However, from the day he was appointed, he knew about the challenges, and expectation of Nigerians. At the time, the nation was beset with economic headwinds – intractable inflation rate, worsening youth unemployment, insecurity, and hunger. The socio-economic situation before his appointment got worsened by the then new administration of President Tinubu who removed fuel subsidy, and harmonized exchange rate. The twin critical decisions compounded the woes of average Nigerian, and dill date, Nigerians are living with consequences of those decisions.
Cardoso assumed office during this whirlwind of economic uncertainties, and had to contend with them. Thus, he set out with own crafted monetary solution tools to retool the economic challenges, especially the Naira exchange rate, unemployment, and the hydra headed inflation spikes.
Outset of his appointment he laid bare his priorities – price and exchange rate stability, bank recapitalization, and inflation targeting. On price stability, and exchange rate, Cardoso promised to promote sustainable economic growth and safeguard Nigerians welfare. Bank recapitalization, he said he planned to increase banks’ capital base to support the federal government’s projected $1 trillion economic expansion. And on inflation, he promised to deploy inflation-targeting framework to enhance monetary policy effectiveness. Thus far, and according to available empirical data, the CBN Governor has done creditably well. Had the economy received complementary gesture from the fiscal authority as the monetary, there may not have been arguments about Cardoso’s performance.
In the year under review, the CBN posted key achievements, among which are the regulatory review of Bureau de Change (BDC) operations, an initiative aimed at promoting transparency in the foreign exchange (FX) market. The new licensing requirements and capital standards imposed on BDCs are designed to enhance oversight, and distribution of foreign currency to ultimately reduce market distortions and ensure a more stable FX market.
Before the policy review, BDCs were alleged to have been complicit in market distortions, and as channels for money laundering. They were also alleged to have been engaging in illicit financial transactions, and safehouse for terrorism financing. Binance case was a classic example. Cardoso had disclosed that $26 billion flowed through Binance Nigeria in one year from sources and users CBN cannot identify.
Nevertheless, Cardoso prioritized the $1 trillion GDP projected economy dearly, and has therefore focused on sustainable, and inclusive growth. Achieving the feat requires strong foundation, and coordinated regulatory bodies. Therefore, its actualization birthed Financial Services Regulation Coordinating Committee Strengthening {FSRCS} to foster inter-agency meetings, and collaborations on issues such as cryptocurrency framework, and other infrastructure financing.
And to achieve this objective also, his leadership at the Bank adopted an explicit inflation-targeting framework to enhance monetary policy effectiveness, while also recognizing the critical role of technology in providing financial services to boost financial inclusion.
Additionally, he ordered a comprehensive overhaul of the consumer protection framework, replacing it with a revised regulations issued in February 2024 to improve standards, and address emerging Fintech risks. Ultimately, to enhance customer service standards, and increased engagement with formal financial institutions.
In furtherance of this objective, a pilot consumer protection risk-based examination was conducted to identify policy gaps, and improve conduct among financial institutions. This complements traditional compliance checks by identifying urgent risks that could affect financial consumer protection. Added to this provision by the Cardoso-led CBN is the enforcement of sanctions to ensure compliance, deter unethical behaviour, and enhance transparency in the financial ecosystem.
The CBN also recognized the essential role of capacity building in refocusing the CBN on its core mandate. Thereby, urging adherence to strict governance. Cardoso acknowledged that the Bank veered, and lost focus of its core mandate, delving and engaging in quasi-fiscal activities. He addressed this challenge by streamlining its operations to improve efficiency, and align with Bank’s revised strategic objectives.
Generally, the CBN governor, under the present economic environment couldn’t have done better. And, if not for his discipline and firmness, the impressive commendations would have been knocks.
However, the governor can double his efforts in the years to come to bring to reality those words he spoke that with well-coordinated policies, the government can make businesses, and individuals thrive. With those words Nigerians are looking forward to better coordination of policies, and handshake between the monetary and fiscal authorities.
Tanko Usman writes from Kaduna
