Lagos — Nigeria lost the equivalent of about three percent of its gross domestic product (GDP) because of distortions created by multiple foreign exchange (FX) rates, Central Bank of Nigeria (CBN) Governor Olayemi Cardoso has said.
Using the country’s 2023 nominal GDP of roughly N314 trillion, Cardoso said the three percent loss translates to about N9.42 trillion. He told reporters the losses from the multiple-rate regime exceeded those from the controversial fuel subsidy, which he estimated at about 2.2 percent of GDP.
“Between those, you had 5.2 percent of GDP lost. Not sustainable by any stretch of imagination,” Cardoso said, referring to the combined effect of FX distortions and the fuel subsidy.
Cardoso described the previous FX framework as dysfunctional, with several exchange-rate windows that created different rates for different categories of users. He said access to the cheaper rates was limited to a few, allowing some individuals and businesses to benefit while others were forced to transact at higher rates.
“Depending on who you knew and the access you had would determine the rate you would get,” he said. “When you do a survey of who was able to get those lower rates, you’ll find that just a handful were able to do so.”
The CBN governor said the bank’s reforms have focused on eliminating these distortions and creating a more transparent market based on a willing-buyer, willing-seller approach. He said the reforms have unified exchange rates and helped close the gap between different windows.
“We are pleased that we’ve been able to literally eliminate that distortion, and that our system of willing buyer, willing seller, which allowed transparency and allowed the market to find its own level, is where we are today,” Cardoso said.
He linked the FX reforms to greater macroeconomic stability, improved business planning, and gains in other segments of the economy, including the capital market. He said external reserves have rebounded to more than $55 billion, the highest level in over 18 years, attributing the rise to consistent policy implementation and increased diaspora remittances.
Cardoso also said the CBN’s broader reforms have helped bring inflation down. He reported that inflation had decelerated to 15.39 percent and pointed to reductions in Ways and Means financing and a review of intervention programmes as part of efforts to return the bank to its core mandate.
Before the current administration’s reforms, Ways and Means advances had risen to about N28.7 trillion, while the CBN had implemented interventions amounting to more than N10 trillion, Cardoso said. He argued that excessive liquidity injections had fuelled inflationary pressures.
“You’re pumping so much liquidity into a system with barely little to show for it, and we all know what inflation is about: too much money chasing too few goods,” he said.
Cardoso conceded that some reform measures, including adjustments to interest rates and FX policy, involved difficult decisions, but said they were based on prevailing economic data and Nigeria’s circumstances. He said the aim is to sustain the gains, strengthen monetary policy transmission and create a predictable environment for businesses and households.
“We were coming from a place where confidence had been lost in the bank and in the country, and that was manifested very clearly from the confidence that was lost in our currency,” he said. “The progress recorded so far should be viewed within the context of the economic conditions inherited by the current CBN leadership.”
Cardoso said the CBN will continue to pursue policies that reduce FX pressure, shore up external buffers and support macroeconomic stability so Nigerians and businesses can plan and invest with greater certainty.
