Cardoso calls for stronger economic ties with Middle East

…Reaffirms commitment to reforms and diaspora engagement

The Governor of the Central Bank of Nigeria (CBN), Mr Olayemi Cardoso, has advocated for stronger economic ties between Nigeria and the Middle East, while also emphasising the importance of engaging the Nigerian diaspora in the region.

Speaking during a meeting with Mr Talal Al-Humond, Assistant Governor for Monetary Affairs at the Saudi Central Bank (SAMA), on the sidelines of the recently concluded inaugural Conference on Emerging Market Economies in Riyadh, Saudi Arabia, Mr Cardoso underscored the need for Nigeria to learn from Saudi Arabia’s approach to infrastructural development and tourism.

The conference, jointly organised by the Saudi Ministry of Finance and the International Monetary Fund (IMF) Regional Office, provided a platform for policymakers to address economic challenges facing emerging markets.

Mr Cardoso highlighted Saudi Arabia’s commitment to economic diversification through large-scale transformation projects, tourism investments, and environmental initiatives. He noted that these efforts could serve as a model for Nigeria’s own development strategy.

Reaffirming his commitment to working closely with the Nigerian diaspora in the Middle East, he stressed that improving remittance flows would play a vital role in strengthening Nigeria’s financial sector. He assured that the CBN would continue enhancing macroeconomic fundamentals to create an enabling environment for private sector growth and high-quality job creation.

In response, Mr Talal Al-Humond assured the CBN Governor that the Saudi Central Bank would collaborate with Nigeria to achieve mutually beneficial economic objectives.

During a panel discussion at the conference, moderated by IMF Middle East and Central Asia Director Jihad Azour, Mr Cardoso outlined the financial market reforms undertaken by the CBN to address distortions in Nigeria’s foreign exchange market.

He recalled that, prior to these reforms, there was a gap of up to 60% between the official and parallel exchange rates. However, due to consistent policy measures, increased market confidence, and enhanced transparency in foreign exchange trading, this gap has now narrowed significantly to approximately 4-5%.

Mr Cardoso also detailed the introduction of an electronic matching system to improve transparency, alongside a Foreign Exchange Code of Ethics, which all Nigerian banks have signed to ensure compliance with market regulations. As a result of these measures, he reported that Nigeria’s foreign reserves had surpassed $40 billion, marking the highest level in nearly three years.

Acknowledging Nigeria’s past economic difficulties—including capital outflows, multiple exchange rate regimes, currency depreciation, high inflation, and a backlog of foreign exchange transactions—Mr Cardoso noted that these issues had significantly eroded confidence in the Naira.

Upon assuming office, he stated that his administration prioritised market stability by clearing outstanding forex obligations and restoring investor confidence. He reiterated that Nigeria had adopted a tight monetary policy stance to curb inflation and ensure macroeconomic discipline. Over the past year, the CBN has raised interest rates by 850 basis points and discontinued quasi-fiscal interventions that had previously distorted the economy.

One of the most significant reforms, he noted, was the removal of Nigeria’s fuel subsidy, which had historically cost the country approximately 6% of its Gross Domestic Product (GDP) annually. While previous administrations had struggled to eliminate the subsidy due to political constraints, Mr Cardoso asserted that its removal had significantly improved Nigeria’s fiscal outlook.

He also explained that the CBN’s bank recapitalisation mandate aimed to strengthen the financial system and build resilience against future economic shocks. He expressed confidence that these measures had already contributed to a more robust financial sector.

Reflecting on the broader global economic climate, Mr Cardoso stressed the importance of tailoring policy decisions to Nigeria’s unique circumstances. He pointed out that, while global economic trends had suggested a different course of action, Nigeria maintained a tight monetary policy to stabilise its economy.

Although met with initial scepticism, he noted that a year later, many financial experts and international stakeholders now acknowledge that Nigeria made the right economic decisions based on its specific realities.

Discussing financial inclusion, Mr Cardoso stated that Nigeria’s financial inclusion rate currently stands at 74%. He emphasised the need for further expansion to ensure economic growth benefits all segments of society.

Highlighting the role of digitalisation, he noted that expanding mobile money services, leveraging technology, and implementing gender-focused initiatives would help close the financial access gap, particularly for underserved populations. He stressed that empowering women financially across Africa would have a positive ripple effect on economic development.

Mr Cardoso concluded by reaffirming the CBN’s commitment to policy consistency, macroeconomic stability, and long-term economic resilience.

The two-day conference, held in Al Ula, Saudi Arabia, from 16 to 17 February 2025, provided a strategic forum for policymakers and economic experts to discuss structural changes in the global economy and their implications for emerging markets.