The Central Bank of Nigeria has highlighted the benefits of its foreign exchange market reforms and banking sector recapitalisation exercise. Deputy Governor, Corporate Services, Dr Muhammad Abdullahi, stated that stronger governance, effective risk management, and financial inclusion are crucial to sustaining the resilience of Nigeria's financial system. He made these remarks at the 38th Finance Correspondents Association of Nigeria Seminar in Abuja. The seminar focused on navigating the financial system in the post-banking sector recapitalisation era.
Nigeria's foreign exchange crisis in 2023 had significant economic costs, estimated at 3% of the country's Gross Domestic Product. The crisis also put pressure on external reserves. To stabilise the market, the CBN introduced several measures, including consolidating multiple foreign exchange windows and removing import restrictions. The apex bank also settled outstanding foreign exchange claims and introduced an electronic foreign exchange trading system. These measures aimed to improve transparency and efficiency in the market.
The CBN's measures have helped narrow the gap between the official and parallel market exchange rates to less than 2%. Dr Abdullahi described this development as part of efforts to strengthen stability and confidence in the foreign exchange market. The reforms have contributed to a more stable exchange rate environment. This stability is essential for economic planning and investment.
On banking sector reforms, Dr Abdullahi disclosed that Nigerian banks have raised 4.65 trillion naira in fresh capital. This recapitalisation has strengthened their capacity to support economic growth and finance critical sectors, including infrastructure and industry. The increased capital base will enable banks to provide more loans and support development initiatives.
However, Dr Abdullahi stressed that stronger capital bases must be complemented by sound governance structures, effective internal controls, and robust cybersecurity measures. These measures are necessary to protect depositors, investors, and other stakeholders. The CBN is emphasising the importance of good governance and risk management in the banking sector.
Dr Abdullahi also called for improved access to financial services for underserved groups, particularly rural communities, women, and young entrepreneurs. He urged stakeholders to play their respective roles through responsible supervision and continued collaboration to sustain the gains of the reforms. The CBN is committed to promoting financial inclusion and consumer protection.
The Director, Corporate Communications and Investor Relations Department, CBN, Michael Chukwuemeka, urged banks to leverage their strengthened capital bases to build a more resilient financial system. He commended the media for promoting public understanding of financial sector reforms and monetary policy decisions. The CBN is working to ensure that stronger financial institutions deliver tangible benefits to the economy.
Key points
- The CBN's foreign exchange market reforms have helped narrow the gap between the official and parallel market exchange rates to less than 2%.
- Nigerian banks have raised 4.65 trillion naira in fresh capital, strengthening their capacity to support economic growth.
- The CBN is emphasising the importance of good governance, effective risk management, and financial inclusion to sustain the resilience of the financial system.
