In a bold move to tackle Nigeria’s foreign exchange challenges, the Central Bank of Nigeria (CBN) Governor, Olayemi Cardoso, has announced the introduction of an electronic FX matching system.
This new system aims to correct what he described as a significant disconnect between the current naira-to-dollar exchange rate and the naira’s actual market value.
Cardoso made this revelation during the Bankers’ Committee Annual Dinner on November 29, 2024, held at Eko Hotel in Lagos.
“Naira’s True Value Distorted by Desperate Buyers”
According to Cardoso, the current exchange rate does not reflect genuine market dynamics but rather the actions of desperate buyers.
“The current USD exchange rate reflects the price that the most desperate buyers are willing to pay,” he explained.
He emphasized that this distorted rate does not represent the naira’s true value.
“The FX matching system will correct these distortions, creating a more transparent and stable FX market,” Cardoso added.
Addressing Market Instability
The FX matching system is part of broader reforms by the CBN to unify Nigeria’s exchange rates and eliminate market inefficiencies.
In recent months, the CBN has taken steps to clear outstanding foreign exchange obligations, boosting confidence among businesses, especially manufacturers and airlines.
Cardoso believes that the new system will enhance price discovery and restore stability in the FX market.
“This will significantly improve transparency and provide a more accurate reflection of the naira’s value,” he noted.
Tackling Disinformation and Panic
The CBN governor also addressed what he called a damaging narrative of a persistent demand-supply gap in the FX market.
He blamed this misinformation for creating unnecessary panic among stakeholders.
“Disinformation about a supposed demand-supply gap has created panic that is unwarranted,” Cardoso said.
He assured Nigerians that the FX matching system would help end these misconceptions by ensuring rates reflect actual market activity.
Banks Must Step Up
Cardoso challenged Nigerian banks to take a more active role in stabilizing the FX market.
He argued that the FX market cannot depend solely on the CBN’s interventions.
“An FX market defined solely by when and how the Central Bank buys or sells dollars is inadequate for the needs of a dynamic economy like Nigeria’s,” he stated.
He urged financial institutions to take on greater intermediation and market-making responsibilities.
A Call for Confidence and Long-Term Investment
The governor expressed optimism that the new system would foster stability and predictability in the FX market.
He reiterated the CBN’s commitment to creating a policy environment that promotes economic growth and price stability.
“With the rollout of the FX matching system, we aim to encourage long-term investments and restore confidence in Nigeria’s FX market,” Cardoso said.
