The Centre for the Promotion of Private Enterprise has issued a call to action for the newly appointed Governor of the Central Bank of Nigeria, Olayemi Cardoso. The organization has outlined a comprehensive “Ten Point Agenda For The CBN Governor” in a press statement released on Sunday.
Muda Yusuf, the Managing Director of CPPE, emphasized the urgent need to prioritize clearing the backlog of forex exchange obligations. He stated, “The clearance of the backlog of forex obligations should be accorded the highest priority to restore the confidence of both domestic and foreign investors.”
News About Nigeria understands that Mr. Yusuf has tasked Governor Cardoso with implementing policies aimed at deepening stakeholder engagement and enhancing the efficiency of the financial system.
The naira recently hit its lowest point at N995 against the U.S. dollar due to increased demand and inadequate supply. To address this issue, Yusuf suggested the establishment of an autonomous window within the banking system, where the currency can trade freely without hindrances. This measure aims to reduce reliance on the street FX market, commonly known as the black market.
Another critical concern highlighted by Yusuf is the need to strengthen the financial intermediation role of deposit money banks. He emphasized that these banks should play a pivotal role in mobilizing financial resources from surplus areas of the economy to deficit segments. Currently, financial conditions remain tight for the private sector, with limited access to credit. Banking system credit to the private sector in Nigeria lags behind global and sub-Saharan averages, particularly for small businesses, which represent a significant portion of the GDP.
Yusuf proposed that Governor Cardoso should also address the efficiency of the financial system, particularly the widespread between deposit and lending rates in the Nigerian banking system. This high spread, which exceeds global and regional averages, hampers investment growth and discourages savings.
Furthermore, Yusuf stressed the importance of recapitalizing banks, given the significant erosion of their capital base over the years. He argued that maintaining a strong capital base is crucial for the stability of the financial system.
Regarding the fiscal deficit, he advised the CBN to adhere to statutory limits to prevent adverse impacts on the macroeconomic environment.
On the issue of the naira redesign policy, Yusuf recommended suspending it indefinitely, emphasizing that it should not be a current priority. Instead, he urged the central bank to sustain momentum in promoting a cashless economy without resorting to drastic measures.
In addressing the tenure and cost of funds in the banking system, CPPE stressed the need to improve macroeconomic fundamentals to rectify the maturity structure of funds in the banking system. High lending rates, especially for SMEs and non-bank financial institutions, hinder investment and job creation. Lowering interest rates would require a combination of monetary and fiscal policies.
Finally, Yusuf advised reducing concentration risk in the banking sector, as the top ten banks in the country currently hold a substantial portion of bank assets and liabilities. This concentration poses systemic vulnerabilities to the economy, and CPPE recommended diversifying assets and liabilities for a more stable banking system.