Nigeria Doesn’t Need IMF Funding to Close Liquidity Gap, Reports $24bn FX Inflow in Q1 2024- Cardoso

The Governor of the Central Bank of Nigeria (CBN), Mr. Olayemi Cardoso, stated that Nigeria does not currently require any concessionary funding from the International Monetary Fund (IMF). He highlighted that the country has sufficient exposure from various sources to address its liquidity needs.

In a 20-minute interview with Bloomberg, Cardoso revealed that Nigeria’s total foreign exchange (FX) inflow reached $24 billion in the first quarter of 2024. He attributed Nigeria’s challenges to temporary issues, expressing confidence in recent fiscal policies to boost revenues and increase the tax-to-GDP ratio.

Cardoso emphasized efforts to double diaspora remittances and reiterated the CBN’s commitment to collaborating with financial institutions, fiscal authorities, and the National Assembly for the successful recapitalization of the banking sector. Speaking at the UK-Nigerian Chamber of Commerce forum in London, he assured the protection of property rights and minority shareholders’ interests.

Addressing the question of whether Nigeria would need IMF funding to bridge liquidity gaps, Cardoso stated, “As of now, we have what it takes from existing sources to close the gap and move the country forward.” He added that the temporary issues Nigeria faces would be resolved as new policies take effect, particularly those increasing revenue and tax contributions to GDP.

Cardoso pointed to the significant increase in FX inflow, which reached about $24 billion in Q1 2024, marking a 40-50% rise compared to previous quarters up to 2021. This positive impact is expected to continue, enhancing liquidity in the country.

Recognizing the crucial role of the Nigerian diaspora, Cardoso mentioned initiatives to increase remittances through International Money Transfer Operators (IMTOs). The goal is to double the inflows from IMTOs, which is already showing positive results and improving liquidity.

He stressed the importance of diverse FX inflow sources for Nigeria’s economic stability, beyond the Eurobond market and foreign portfolio investors. Cardoso noted that upon taking office 10 months ago, there were significant distortions in the FX market, which he and his team have been addressing to restore confidence and stability.

Efforts to correct these distortions included various circulars to banks and adjustments within the FX system, resulting in increased confidence and liquidity in the market. Cardoso highlighted recent stability in the currency market, with the two different FX rates converging, allowing businesses to plan more effectively.

Represented by CBN Deputy Governor for Financial Systems Stability, Mr. Phillip Ikeazor, at the forum in London, Cardoso reiterated the CBN’s commitment to fostering a resilient banking sector capable of supporting the federal government’s goal of achieving a $1 trillion GDP by 2030.

The recapitalization program aims to enhance banks’ lending capacity, boost foreign direct investment (FDI), and increase FX liquidity. This initiative is expected to contribute to GDP growth, better risk management, improved credit ratings, diversified ownership, better governance, and a more vibrant equity market.

Cardoso emphasized the new minimum capital requirements’ basis on macroeconomic conditions, stress test outcomes, and the need for improved risk management. He assured rigorous enforcement of criteria for prospective bank shareholders, senior management, and board members to maintain financial integrity.

Reflecting on his priorities since assuming office in October 2023, Cardoso mentioned monetary and price stability, exchange rate stability, inflation control, and creating an enabling business environment. The recapitalization directive, excluding retained earnings from minimum capital requirements, aims to simplify capital calculations and enhance transparency in line with international standards like Basel III.

Building on the successful 2004/5 Banking Sector Reforms, which consolidated the industry and increased resilience, the current recapitalization drive seeks to further strengthen Nigeria’s banking sector.

June 28, 2024