The Central Bank of Nigeria (CBN) has announced its plans to introduce a new set of foreign exchange laws and guidelines to address the depreciation of the naira and achieve exchange rate stability.
The CBN Governor, Yemi Cardoso, said that the apex bank will also conduct a new recapitalisation exercise for the banking industry, by requiring banks to increase their minimum capital base to a level sufficient to support the vision of a $1trillion economy.
Cardoso also revealed that the CBN will introduce a new licensing framework for fintechs and payment banks, warning that operators found engaging in activities outside their licenses will be sanctioned.
He said that the CBN will ensure the proper functioning of domestic and foreign currency markets, by developing clear, transparent, and harmonised rules governing market operations.
He added that extensive consultations will be conducted with banks and FX market operators before implementing any new requirements.
Furthermore, Cardoso said that the CBN will tighten money supply for the next two quarters, to curtail the challenge of rising inflation.
He said that the CBN will also conduct another round of liquidity mop up via issuance of Open Market Operations, OMO, treasury bills, to reduce excess cash in the banking system.
Cardoso said that the CBN’s monetary policies will aim to achieve price stability, foster sustainable economic growth, stabilise the exchange rate of the naira, and reduce interest rates to facilitate borrowing and investments in the real sector.
He said that the CBN will evaluate the adequacy of the banking industry to serve the envisioned larger economy, and direct banks to increase their capital accordingly. He said that the CBN will restore macroeconomic stability and address fundamental flaws.
“Our monetary policies will aim to achieve price stability, foster sustainable economic growth, stabilize the exchange rate of the naira, and reduce interest rates to facilitate borrowing and investments in the real sector.
“In order to ensure the proper functioning of domestic and foreign currency markets, clear, transparent, and harmonized rules governing market operations are essential.”
“New foreign exchange guidelines and legislation will be developed, and extensive consultations will be conducted with banks and FX market operators before implementing any new requirements.
“Considering the policy imperatives and the projected economic growth, it is crucial for us to evaluate the adequacy of our banking industry to serve the envisioned larger economy. It is not just about the stability of the financial system in the present moment, as we have already established that the current assessment shows stability.
“However, we need to ask ourselves: Will Nigerian banks have sufficient capital relative to the financial system’s needs in servicing a $1.0 trillion economy in the near future?
“In my opinion, the answer is ‘No’ unless we take action. “Therefore, we must make difficult decisions regarding capital adequacy. As a first step, we will be directing banks to increase their capital”
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