Based on calculations from previously cleared FX liabilities
announced by the CBN, $1.8 billion is now remaining.
Speaking at the meeting on Thursday, Cardoso said the
remaining backlog, linked to five banks, would be cleared soon.
“Basically what we have done with those is we have paid as
much as we can to the point where we have cleared the backlog of all the banks
to save five,” Cardoso said.
“All the bank’s
genuine and verifiable backlogs have been cleared save five.
“We are confident that we will shortly be in a position
where the whole issue of forwards would be behind us. I would say in the next
few days we should be in a position where the balance of the five would have
been put behind us.”
CBN also reiterated that the naira is undervalued, adding
that the current FX pressures are linked to panic, which is driving hurried
monetisation of assets.
Cardoso said the apex bank expects the local currency to
stabilise in the near term, supported by the recent action of the Nigerian
National Petroleum Company (NNPC) Limited to move some of its accounts to the
CBN.
This stability, the regulator said, is also expected to be
supported by foreign inflows ($2 billion year-to-date vs $3 billion for the
whole of 2023).
OMO FREQUENCY TO BE
INCREASED
Further speaking, the CBN pledged to increase the frequency
of the open market operation (OMO).
The regulator added that the interest rate trajectory is
“biased to the upside” and guided to higher stop rates at coming OMO and
national treasury bills (NTB) auctions.
Cardoso noted that the stop rates are expected to edge
closer to the monetary policy rate (MPR) of 22.75 percent.
He said the CBN plans to increase OMO frequency and volumes
“to mop up liquidity and provide investment opportunities for FPIs”.
On inflation, Cardoso said the financial institution will
stop at nothing to tame the current inflation to ensure price stability.
According to the CBN governor, the apex bank has a clear
understanding of the drivers of inflation, which includes currency pressures.
He assured that the bank will supply and intervene in the
market whenever there are distortions, adding that the CBN would work to ensure
ample liquidity for the free entry and exit of foreign portfolio investors.
On the cash reserve ratio (CRR) pegged at 45 percent,
Cardoso said some banks will get refunds under the new CRR regime, while others
will be required to make payments.
He said the net effect of the new CRR is about N5 trillion
(debit to the system), however, the mop-up will be done gradually to avoid
causing shock to the financial system.
‘CBN’S EFFORTS WILL
BOOST INVESTMENT’
Commenting on the outcome of the meeting, CardinalStone, an
investment management firm, said the CBN’s recent efforts to restore market
confidence and enhance communication with investors “are likely to boost the
investment case of Nigeria”.
“Specifically, efforts to clear the balance of existing
backlogs, sanitize the FX ecosystem, and improve carry trade could attract more
foreign interest,” the company said.
“We see scope for higher-for-longer interest rates in the
domestic market, which could drive fixed-income fund managers into a short-duration
strategy.”
CardinalStone, however, said in the equities space, higher
interest rates could depress valuations but savvy investors could prioritise
allocations to stocks with strong positive earnings correlation to interest
rates (such as banks), high dividend income, and low leverage.
