Governor of the Bank of Ghana (BoG), Dr Ernest Addison has said that Nigeria is currently saddled with a crisis related to the challenges posed by its currency, the Naira.
He said this is similar to what Ghana went through in 2022 when inflation kept rising, coupled with the rapid depreciation of the Cedi.
Reuters reported that the Naira dropped to a record intra-day low against the dollar following a devaluation, its second adjustment in less than a year, despite the central bank saying liquidity was improving.
Central bank governor Olayemi Cardoso said on Friday that over $1 billion had come into the economy in the last few days to buy Nigerian Treasury bills after it auctioned one trillion naira ($678.60 million) worth of notes that were oversubscribed.
The central bank this week hiked open market rates to 19% from under 12% to draw investors to bills which had lost their shine to equities as inflation climbed to a nearly three-decade high and lagged behind the benchmark policy rate of 18.75%. It also scrapped caps on interbank forex spreads.
“These measures, aimed at ensuring a more market-oriented mechanism for exchange rate determination, will boost foreign exchange inflows, stabilize the exchange rate, and minimize its pass-through to domestic inflation,” he said.
Answering questions at the Monetary Policy Committee (MPC) press conference in Accra on Monday, March 25, Dr Addison said “Nigeria is in quite a bit of trouble, especially on the foreign exchange market side. Because of the multiple currency practices that were in place until the recent change, so the Naira has seen a very large depreciation and at the same time the removal of the subsidies on petrol so the cost of living in Nigeria has shot up.
“Nigeria is going through the crisis that we went through in 2022, they are going through theirs now and the corrective measures are no different from the corrective measures that we have put in to manage their fiscal policy properly and then also ensure that the monetary policy tools are used as they should be, to focus on the primary objective of the central bank, not to use the central bank resources to buy rice, that is not what central banks are supposed to do.
“I think they are refocusing on their primary mandate by managing liquidity in the economy aimed at ensuring price stability.
“We all hear all these rumors about cross-border illegal transfers and we are counting on our security agencies to assist us to enforce these rules at the border points, at the airport, and at some of the exits of the country.
“If the security agencies do not help, there is nothing the Bank of Ghana can do about that, so they have to play their role to ensure that the rules are enforced. But we haven’t seen nor had any evidence of any transfers from the banks to Nigeria, we are very much focused on the banks, and we are looking very closely at all their transactions. It is not a matter we are taking lightly, and I think the banks are sitting up,” Dr Addison said.
