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FX challenges worsened by $40bn spent on foreign education, medical tourism — Cardoso

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…BDC to undergo overhaul as Cardoso targets currency hoarders

…Says CBN’s bold reforms lead to $800m in forex transactions

By Sodiq Adelakun

In an address to the House of Representatives on Tuesday, Yemi Cardoso, the Governor of the Central Bank of Nigeria (CBN), raised concerns over the substantial foreign exchange spent on foreign education and medical tourism, which he believes is contributing to the country’s economic challenges.

Governor Cardoso revealed that Nigerians have spent an alarming $40 billion on overseas education and healthcare over the past decade.

He pointed out that from 2010 to 2020, $28.65 billion was directed towards educational expenses abroad, with medical tourism accounting for an additional $11 billion.

The CBN Governor emphasised that the massive outflow of foreign exchange for these services has had a significant impact on the value of the Nigerian Naira, which has seen a sharp decline to over N1,400 in the official market.

He noted that the total amount spent on these foreign services even surpasses the nation’s total foreign exchange reserves. Cardoso suggested that if a considerable portion of this demand had been mitigated, the Nigerian currency could have been in a much stronger position today.

The revelation comes as Nigeria grapples with economic pressures and seeks solutions to stabilise its currency and improve its balance of payments.

“Similarly, medical treatment abroad has entered around $11 billion in costs during the same period. Consequently, over the past decade, foreign exchange demand for education and healthcare has totaled nearly $40 billion.

“Notably, this amount surpasses the total foreign exchange reserves of the CBN. Mitigating a significant portion of this demand could have resulted in a considerably stronger naira today.”

The CBN has been actively managing these expenditures through its approved rate for school fees and healthcare payments. Cardoso pointed out a notable shift in the pattern of demand for Personal Travel Allowance (PTA) for overseas education fees, a trend that has evolved considerably since the early 1990s.

The Central Bank Governor projected that the number of Nigerian students abroad is set to surpass 100,000. This trend underscores the increasing international educational aspirations of Nigerian students and the significant financial implications for the country’s foreign exchange reserves.

Cardoso also revealed plans to introduce a new foreign exchange operation mechanism for the operation of the Bureau de Change segment and tackle currency hoarding.

…CBN’s bold reforms lead to $800m in forex transactions

Also, the CBN governor announced that recent reforms are starting to have a positive impact on liquidity in the foreign exchange market.

The volume of transactions in the market reached over $800 million, the highest level in many years.

The Governor stated that the country is at a turning point and that bold reforms are underway across different segments of the economy.

The naira has depreciated significantly against the dollar since 26 January, following measures taken by the central bank to align the official market value closer to the parallel market, as part of an ongoing effort to bridge the gap between the rates at the NAFEM window and the parallel market.

He stated, “As of yesterday, the volume of transactions in our market was over $800 million. This is the first time in many years it has achieved this level.

“I want to emphasise that we are now at a turning point and bold reforms are underway across different segments of the economy. I’m confident that positive outcomes are already emerging and will become more apparent shortly.”

The Nigerian naira has experienced a significant decline against the US dollar in recent weeks, following measures taken by the central bank to align the official market value with the parallel market.

This move is part of a wider effort to reduce the gap between the rates at the NAFEM window and the parallel market.

The scarcity of dollars in the domestic market has contributed to the currency’s weakness, prompting the central bank to urge Nigerians abroad to repatriate their funds through official channels.

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FG urges NIPSS members on creative solutions to national challenge

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The Minister of Budget and Economic Planning, Atiku Bagudu, has urged members of the National Institute for Policy and Strategic Studies (NIPSS), to devise creative solutions to Nigeria’s social and economic challenges.

Bagudu received  participants of the Senior Executive Course 46 of the institute in his office on Monday in Abuja.

According to him, some of the issues confronting Nigeria  as a nation might require out of the box solutions.

“The NIPSS was created in the wisdom of our forefathers, to train senior management personnel that can bring unusual solutions to problems confronting us,” he said.

He urged the participants to eschew self-interest and make decisions that can assist the nation to make better choices.

Bagudu  said that the national planning function of the ministry comes from the National Planning Commission.

He said that the digital economy is one area that the ministry was looking at for mass youth engagement and economic prosperity.

“Digital economy is an evolving process.which the country will have to leverage digital for overall growth and development.

“It is a new reality. Today trading platforms are closing shop and increasingly going digital.

“Nigeria needs to respond positively and reap benefits from the digital economy. But we have to make the space safe through effective regulation.

“Some countries have data protection laws which enable them to check and regulate excesses in the digital space,” he said.

The Minister commended the law enforcement agencies for promptly going after digital platforms like Binance, which was used to disrupt the foreign exchange market and to weaken the Naira.

He also commended the Governor of the Central Bank of Nigeria (CBN), Yemi Cardoso, for his various monetary policy decisions that restored confidence in the Nigerian economy.

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Cardoso to speaks at IMF meeting on FX reforms

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The Governor of the Central Bank of Nigeria (CBN), Olayemi Cardoso will speak on foreign exchange (FX) market reforms at the ongoing International Monetary Fund (IMF) Spring Meetings on Wednesday in Washington D.C.

The meetings of the Boards of Governors of the IMF and the World Bank Group (WBG) bring together central bankers, ministers of finance and development, parliamentarians, private sector executives, representatives from civil society organisations and academics to discuss issues of global concern, including the world economic outlook, poverty eradication, economic development, and aid effectiveness.

Also featured are seminars, regional briefings, press conferences, and many other events focused on the global economy, international development, and the world’s financial system

Cardoso assumed office as the Governor of the CBN in September 2023. Since then he has introduced some new FX policies and adjusted some existing ones to ensure the stability of the naira.

According to Cardoso, the exchange rate in Nigeria has increased/depreciated due to the simultaneous occurrence of two factors: a decline in the supply of US Dollars coinciding with a surge in the demand for US dollars.

He said in February 2023 that the foreign exchange market is currently facing increased demand pressures, causing a continuous decline in the value of the naira. Factors contributing to this situation include speculative forex demand, inadequate forex supply due to non-remittance of crude oil earnings to the CBN, increased capital outflows, and excess liquidity from fiscal activities.

To address exchange rate volatility, he said a comprehensive strategy has been initiated to enhance liquidity in the FX markets.

This includes unifying FX market segments, clearing outstanding FX obligations, introducing new operational mechanisms for BDCs, enforcing the Net Open Position limit, and adjusting the remunerable Standing Deposit Facility cap.

As part of measures to control inflation and stabilise the naira, the CBN last month raised its benchmark interest rate, known as the Monetary Policy Rate (MPR) by 200 basis points to 24.75 percent from 22.75 percent in February 2024.

In her second term message, Kristalina Georgieva, IMF managing director, who was recently reappointed by the executive board of the IMF, said, “I am deeply grateful for the trust and support of the Fund’s Executive Board, representing our 190 members, and honoured to continue to lead the IMF as managing director for a second five-year term.”

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PenCom recovers N12.45bn from erring employers

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The National Pension Commission (PenCom) said it has recovered N12.45 billion from employers that failed to contribute towards their employees retirement.

The recovery would indeed help in wealth creation for the workers, thereby securing them against old age poverty in retirement.

PenCom in its 4th quarter 2024 report, said it has maintained the services of Recovery Agents (RAs) for the recovery of unremitted pension contributions and penalties from defaulting employers.

It submitted that during the quarter, the sum of N319,468,587.45 comprising principal contributions N128,176,029.95 and penalties N191,292,557.50 was recovered from 32 defaulting employers.

It noted that meanwhile, the Commission Secretariat/Legal Advisory Services Department had been requested to take legal action against 4 defaulting employers.

The pension industry regulator maintained that from the commencement of the recovery exercise in June 2012 to 31 December 2023, a total sum of N25,447,085,186.71 comprising of principal contributions N12,929,415,445.52 and penalties N12,517,669,741.19 was recovered from defaulting employers.

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