The Central Bank of Nigeria (CBN) rolled out a series of reforms in 2024 aimed at bringing significant and positive changes to the economy.
Some of the key reforms targeted taming inflation, enhancing the financial sector, and improving the naira’s exchange rate in the foreign exchange markets.
The year 2024 was a tough year for Nigerians due to naira fall and rising inflation.
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Source: Getty Images
Olayemi Cardoso, the CBN Governor, provided early insights into 2024 plans during his speech at the launch of the Nigerian Economic Summit Group (NESG) 2024 Macroeconomic Outlook in January, stating:
“We are now at a turning point, and bold reforms are being undertaken across different segments of the economy. Our focus is on addressing fundamental issues that have hindered the effective operation of our markets over the years.”
As the year draws to a close, it is time to assess the impact of CBN’s policies implemented throughout 2024.
Inflation rate
The CBN implemented aggressive measures during the year to combat inflation by raising interest rates.
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The monetary policy rate (MPR) at the start of the year stood at 18.75%.
Concerned about rising inflation, the apex bank decided to raise the rate to 22.75% in February 2024. The increase in the MPR continued throughout the year.
In March, the CBN’s MPR rose to 24.75%, remained stable in April, and increased again in May to 26.25%. In June, it stayed at 26.25% before another increase was implemented in July, bringing it to 26.75%.
Another increase was implementedn September with MPR rising to 27.25%.
Once again, in November, in the last meeting of the year, the CBN’s Monetary Policy Committee (MPC) raised the interest rate again to 27.50%
A snapshot
January 2024: MPR stood at 18.75%.February 2024: Raised to 22.75% to combat rising inflation.March 2024: Increased to 24.75%.April 2024: MPR remained stable at 24.75%.May 2024: Increased to 26.25%.June 2024: MPR remained stable at 26.25%.July 2024: Raised further to 26.75%.September 2024: 27.25%.November 2024: Final increase of the year, raising the MPR to 27.50%
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The impact
Despite these aggressive MPR increases aimed at taming inflation, the impact was not seen.
Nigeria’s inflation rate Nigeria’s headline inflation rose to 34.6% in November compared to 29.90% reported in January 2024.
Throughout the year, businesses and Nigerians have been forced to pay higher interest rates to access loans from financial institutions.
Foreign exchange Policy
Cardoso, at the start of the year, expressed optimism that the naira will appreciate in the foreign exchange market.
To achieve this, several policies were introduced to achieve the target, and it is only recently that Nigerians have been given a sign to believe.
Here are some of the FX-related policies introduced
Financial markets price transparency- The CBN permitted financial markets transactions to be conducted on a ‘willing buyer willing seller’ basis, and, therefore expects prices to be quoted and displayed in a transparent manner.Harmonisation of foreign currency exposure- The apex bank released a guideline to checkmate banks choosing to hold more foreign exchange in their account.Removal of limit of exchange rate quoted by the international money transfer operators to boost remittance inflowImplementation of Price Verification System (PVS) for Form M application used by importers but this was later discontinued.Revocation of operational licenses of 4,173 Bureau de Change operators.Sales of forex to BDCs to fight naira depreciationStopping the use of customers foreign exchange currency as collateral for naira loansReintroduction of Retail Dutch Auction System (rDAS) which is a direct sale of Forex by the CBN through the banks to the end users.The introduction of the Electronic Foreign Exchange Matching System (EFEMS).Implementation of the Bloomberg Bmatch system for foreign exchange tradingCollaboration with the Ministry of Finance and the NNPCL to ensure that all FX inflows are returned to the Central Bank. This coordinated effort improved Nigerian external reserves now at nearly $42 billion
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Financial sector stability
Another area of concern for the CBN is the stability of the financial sector and the safety of customers’ deposits.
Various actions were taken by the apex bank throughout the year to achieve this goal.
The year started with the CBN decision to Dissolves the Board and Management of Union Bank, Keystone Bank and Polaris Bank. New excecitives was appointed the next day.Requiring microfinance banks to submit their financial data monthly to ensure a stable financial system by collecting accurate and reliable information.New guidelines on the management of dormant account, unclaimed balances and financial assets, and outlines the procedure for the administration of these balances, funds, and assets.Revocation of the banking licence of heritage bank plcCBN approves the merger of Unity Bank and Providus Bank into a single entity and providing financial support to avoid another Heritage bank saga
Outlook for 2025
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Although it is very early, there is expectations that 2025 will be a better year for the Nigerian economy.
The impact of EFEM is already evident in the forex market, with the naira, which previously traded as high as N1,780 per dollar in the parallel market and N1,680 in the official market.
Naira currency exchanged at N1,541.68/$1 in the parallel market and N1,650/$1 in the official market as of December 20.
PresidentTinubu while presenting the 2025 budget to the national assembly said that he expects the naira to hit N1,500 a dollar.
His words:
“His words: “The 2025 budget projects that inflation will decline significantly from the current 34.6% to 15% by the end of next year.
“Concurrently, the exchange rate will improve from approximately N1,700 per dollar to N1,500. These projections are critical for stabilising the economy and ensuring sustainable growth.”
LCCI speaks on expectations for 2025
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Henzodaily.ng previously reported that the Lagos Chamber of Commerce and Industry (LCCI) has advised business owners to prepare for a more challenging 2025.
The chamber attributed this outlook to expectations of a more hawkish monetary policy.
LCCI has urged the federal government to boost oil production and provide regulatory support to help stabilise the naira.
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Source: Henzodaily.ng