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Naira depreciation: CBN to issue fresh foreign exchange regulations and policies The Cardoso Commentary

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Naira depreciation: CBN to issue fresh foreign exchange regulations and policies The Cardoso Commentary

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Mr. Yemi Cardoso, governor of the Central Bank of Nigeria (CBN), stated yesterday that new foreign exchange legislation and guidelines will be introduced by the apex bank in the near future to combat naira depreciation and promote exchange rate stability.

The CBN, according to him, will also execute a new recapitalisation exercise for the banking industry, by requiring banks to boost their minimum capital base to a level necessary to meet the ambition of a $1trillion economy.

In a keynote address at the 2023 Annual Bankers Dinner of the Chartered Institute of Bankers of Nigeria, CIBN, Cardoso made the announcement.

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Cardoso also revealed that the CBN will develop a new licensing structure for fintechs and payment banks, threatening to punish operators who do business without the proper authorization.

Cardoso has stated that for the next two quarters, the central bank will tighten money supply in order to combat the threat of growing inflation. He also said that the management of the CBN has approved and would shortly carry out another round of liquidity mop up by issuing Open Market Operations, OMO, treasury bills in order to further decrease excess cash in the banking sector.

As he put it:

Our monetary policies will work toward price stability, the promotion of long-term economic growth, the maintenance of a stable naira exchange currency, and the lowering of interest rates to make it easier for citizens to take out loans and make investments in the real economy. Clear, open, and standardized rules governing market operations are crucial for the smooth running of local and foreign currency markets.Before enforcing any new regulations, banks and FX market operators would be consulted extensively on the proposed new foreign exchange guidelines and legislation.

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It is critical that we assess the preparedness of our banking sector to support the anticipated larger economy in light of the policy requirements and predicted economic development.

stability observed throughout the evaluation. But the question that must be asked is whether or not Nigerian banks will have adequate capital to meet the needs of the financial system in serving a $1 trillion economy in the near future.

future? Without intervention, the answer, in my view, is “No!”As a result, tough choices concerning capital adequacy must be made. To begin, we’ll be mandating that banks invest more in the emerging fintech sector in accordance with Cardoso’s prediction that “technology will continue to play a critical role in delivering financial services and enhancing financial inclusion.”Nonetheless, modern

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Concerns have been expressed about the use of technology and the current licensing and regulatory framework in the payment services industry as a result of recent advances. It has come to our attention that some licensees are engaging in illegal activities not covered by their permits. “Operators have the responsibility to ensure that they are licensed for the activities they do, and any violation, whether deliberate or not, will be subject to punishment. “Concurrently, as we conduct a comprehensive review of the licensing framework for payment services, we will engage in extensive consultations to develop a new regulatory and compliance framework that is suitable for the technology-driven payment services sector.”capital.

 

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