Sanusi: CBN’s focus on price stability is a clear signal

The former Governor of the Central Bank of Nigeria and the 14th Emir of Kano, Sanusi Lamido Sanusi, emphasized the crucial importance of the apex bank's return to its core focus on price stability during an interview with CNBC Africa. Sanusi highlighted that this shift in policy direction was eagerly anticipated by the markets. He expressed the need for aggressive monetary tightening, increasing forex liquidity, and clearing outstanding backlogs to bolster the Nigerian naira. Furthermore, renegotiating lower interest rates on ways and means negotiations was deemed vital to alleviate current financial pressures. Sanusi pointed out that the Central Bank of Nigeria (CBN) had initially signaled a tightening through its Monetary Policy Committee (MPC). However, in practice, the bank's actions resulted in a loosening of money due to significant ways and means advances to the government. This discrepancy eroded the credibility of monetary policy, posing a threat to economic stability. By resuming a more disciplined approach, the CBN aimed to restore faith in its policies. The interview delved into the essential measures needed to stabilize the currency. Sanusi outlined three critical steps: tightening money in Naira, boosting liquidity in the market, and addressing overdue payments. While progress had been made on tightening money and beginning to clear pending debts, sustaining liquidity in the long term remained a priority. Sanusi expressed optimism about the potential for stability in exchange rates and inflation by year-end, provided the current trajectory continued. While lauding the CBN's efforts, Sanusi underscored the need for a comprehensive approach beyond monetary policy. He emphasized the pivotal role of the Nigerian National Petroleum Corporation (NNPC) in generating foreign exchange. Sanusi urged measures to curb oil theft, reduce leakages, and ensure robust forex inflows from the NNPC. Without a self-sufficient forex generation strategy, the reliance on portfolio flows could risk instability in the future. Sanusi highlighted the importance of policy credibility and decisive action by the CBN. He commended the central bank for demonstrating a clear strategy and taking necessary steps toward financial stability. The collaboration between the CBN and the Ministry of Finance to address interest rates and debt burdens was viewed as a positive sign of coordination. Regarding the forthcoming meeting of the CBN's Monetary Policy Committee (MPC), Sanusi stressed the significance of effective implementation over mere announcements. He praised the central bank's willingness to raise interest rates despite potential government opposition, viewing it as a step towards reclaiming autonomy and focusing on core objectives. In conclusion, Sanusi emphasized the need for sustained efforts to bolster the naira, attract forex inflows, and instill confidence in the market. He called for transparency, a clear direction, and a collaborative approach between the CBN and the government to navigate the complex economic landscape and ensure long-term stability.