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Sunday, December 10, 2023

CPPE urges new CBN governor to address forex backlog, financial system efficiency

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The Centre for the Promotion of Private Enterprise (CPPE) has called on Nigeria’s newly appointed Central Bank Governor, Olayemi Cardoso, to prioritize clearing the backlog of forex exchange obligations. CPPE issued a press statement titled “Ten Point Agenda For The CBN Governor,” highlighting key areas for attention.

Muda Yusuf, the Managing Director of CPPE, emphasized the importance of addressing the forex backlog to restore the confidence of both domestic and foreign investors. This comes in light of the naira recently reaching its lowest point at N995 against the U.S. dollar due to high demand and limited supply.

Yusuf recommended the establishment of an autonomous forex trading window within the banking system to reduce reliance on the street FX market, commonly referred to as the black market.

Another key issue raised by CPPE is the need to deepen the financial intermediation role of deposit money banks. Banking system credit to the private sector in Nigeria remains relatively low at 20.6% of the nation’s GDP, compared to sub-Saharan and global averages of 28% and 145%, respectively. Access to credit for small businesses, which account for a significant portion of the GDP, remains limited.

Efficiency concerns in the Nigerian banking system were also addressed, with the report highlighting a high spread between deposit and lending rates, which is detrimental to investment growth and savings.

Yusuf called for the recapitalization of banks to ensure their capital base can support their current exposures and maintain financial system stability.

Regarding financing the fiscal deficit, CPPE urged the new CBN governor to keep it within statutory limits to prevent adverse impacts on the macroeconomic environment.

Finally, CPPE recommended addressing concentration risk in the banking sector, as the top ten banks in the country currently account for 80% of bank assets, total loans, and deposit liabilities, posing systemic vulnerability risks.

The NGO’s statement outlined these key areas as priorities for the new Central Bank leadership as it navigates economic challenges in Nigeria.

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