The CBN governor appeared before the House of Representatives on Tuesday alongside other prominent members of the government like the Minister of Finance and Coordinating Minister for the Economy, Wale Edun, and the Minister of Budget and National Planning, Atiku Bagudu, to discuss the free fall of the naira and the state of Nigeria’s economy.
Delivering a paper, Cardoso said there has been a steep rise in the number of Nigerians studying abroad, adding that this has constituted severe pressure on the Naira.
The CBN chief said the exchange rate in Nigeria has increased due to a decline in the supply of US dollars.
He said, “Looking at the demand side of the exchange rate, it is important to note the growing number of Nigerian students studying abroad,” he said. “In the 1980s and 1990s the need for US dollars for their living expenses was minimal. However, recent data show a significant change
“Additionally, the UK’s Higher Education Statistics Agency noted a 64% increase in Nigerians studying in the country, riding from 1620 in 2019/2020 academic session to 21,305 by the 2020/2021 session. Given this data, it is crucial to highlight that between 2010 and 2020, foreign education expenses amounted to a substantial $28.65 billion as per the CBN’s publicly available balance of payment statistics.”
Cardoso further said, “Similarly, medical treatments abroad has incurred around $11 billion in costs during the same period. Consequently, over the past decade, foreign exchange demand for education and healthcare has totalled nearly $40 billion. Notably, this amount surpasses the total coined foreign exchange reserves of the CBN. Mitigating a significant portion of these demands could have resulted in a considerably stronger naira today.
“On the supply side of the exchange rate, to bolster the inflow of US dollars into the country, the economy must earn these dollars through exports. Whether oil or non-oil, or by attracting foreign investments.
“A robust economic foundation is essential to produce goods and services that the global market is willing to pay for in US dollars.
“When the supply surpasses demand, the exchange rate appreciates, causing the price of the dollar to fall. Unfortunately, in Nigeria, the contrary has taken place.”
The CBN governor then noted, “To address exchange rate volatility, a comprehensive strategy has been initiated to enhance liquidity in the forex market. This includes unifying FX market segments, clearing outstanding FX obligations, introducing new operational mechanisms for PDCs, enforcing the net opening position limit, and adjusting the enumerable standard deposit facility cap
“He said that these measures will “boost foreign exchange inflows, stabilize exchange rate, and minimize its past route to domestic inflation.”
Speaking on the rate of inflation in the country, he said, “Inflationary pressures are expected to decline in 2024 due to the CBN’s inflationary policy aiming to rein in inflation to 21.4%, aided by improved agriculture productivity, and easing global supply chain pressures.”
Cardoso, while acknowledging the economic hardships faced in recent times, however said, “I want to emphasize that we are now at a turning point and the bold reforms on the way across different segments of the economy, though initially challenging, are aimed at addressing these challenges sustainably.”
He said he is confident that positive outcomes are already emerging and will be more apparent in the future as he further revealed, “As at yesterday, the volume of transactions on our market was over $800 million. This is the first time in many years that it has achieved this level.”
Cardoso then said, “I acknowledge that despite these commendations, the concerns regarding the cost of living and currency rates remain. Indeed, this is the major topic of concern in our villages, our towns, and our cities. The urgency of the matter is not lost on us at the Central Bank, and I really want to assure you that we are working tirelessly with colleagues from across government, including with the leadership of this house to bring lasting solutions.”
“My team and I are dedicated to refocusing the bank by giving primacy to price stability. We also aim to build confidence in the Nigerian economy through the maintenance of stability in consumer prices and the foreign exchange market”
The Governor of the Central Bank of Nigeria (CBN), Yemi Cardoso, has blamed students studying abroad for the woes of the Naira at the foreign exchange market.
The CBN governor appeared before the House of Representatives on Tuesday alongside other prominent members of the government like the Minister of Finance and Coordinating Minister for the Economy, Wale Edun, and the Minister of Budget and National Planning, Atiku Bagudu, to discuss the free fall of the naira and the state of Nigeria’s economy.
Delivering a paper, Cardoso said there has been a steep rise in the number of Nigerians studying abroad, adding that this has constituted severe pressure on the Naira.
The CBN chief said the exchange rate in Nigeria has increased due to a decline in the supply of US dollars.
He said, “Looking at the demand side of the exchange rate, it is important to note the growing number of Nigerian students studying abroad,” he said. “In the 1980s and 1990s the need for US dollars for their living expenses was minimal. However, recent data show a significant change
“Additionally, the UK’s Higher Education Statistics Agency noted a 64% increase in Nigerians studying in the country, riding from 1620 in 2019/2020 academic session to 21,305 by the 2020/2021 session. Given this data, it is crucial to highlight that between 2010 and 2020, foreign education expenses amounted to a substantial $28.65 billion as per the CBN’s publicly available balance of payment statistics.”
Cardoso further said, “Similarly, medical treatments abroad has incurred around $11 billion in costs during the same period. Consequently, over the past decade, foreign exchange demand for education and healthcare has totalled nearly $40 billion. Notably, this amount surpasses the total coined foreign exchange reserves of the CBN. Mitigating a significant portion of these demands could have resulted in a considerably stronger naira today.
“On the supply side of the exchange rate, to bolster the inflow of US dollars into the country, the economy must earn these dollars through exports. Whether oil or non-oil, or by attracting foreign investments.
“A robust economic foundation is essential to produce goods and services that the global market is willing to pay for in US dollars.
“When the supply surpasses demand, the exchange rate appreciates, causing the price of the dollar to fall. Unfortunately, in Nigeria, the contrary has taken place.”
The CBN governor then noted, “To address exchange rate volatility, a comprehensive strategy has been initiated to enhance liquidity in the forex market. This includes unifying FX market segments, clearing outstanding FX obligations, introducing new operational mechanisms for PDCs, enforcing the net opening position limit, and adjusting the enumerable standard deposit facility cap
“He said that these measures will “boost foreign exchange inflows, stabilize exchange rate, and minimize its past route to domestic inflation.”
Speaking on the rate of inflation in the country, he said, “Inflationary pressures are expected to decline in 2024 due to the CBN’s inflationary policy aiming to rein in inflation to 21.4%, aided by improved agriculture productivity, and easing global supply chain pressures.”
Cardoso, while acknowledging the economic hardships faced in recent times, however said, “I want to emphasize that we are now at a turning point and the bold reforms on the way across different segments of the economy, though initially challenging, are aimed at addressing these challenges sustainably.”
He said he is confident that positive outcomes are already emerging and will be more apparent in the future as he further revealed, “As at yesterday, the volume of transactions on our market was over $800 million. This is the first time in many years that it has achieved this level.”
Cardoso then said, “I acknowledge that despite these commendations, the concerns regarding the cost of living and currency rates remain. Indeed, this is the major topic of concern in our villages, our towns, and our cities. The urgency of the matter is not lost on us at the Central Bank, and I really want to assure you that we are working tirelessly with colleagues from across government, including with the leadership of this house to bring lasting solutions.”
“My team and I are dedicated to refocusing the bank by giving primacy to price stability. We also aim to build confidence in the Nigerian economy through the maintenance of stability in consumer prices and the foreign exchange market”