The Governor of the Central Bank of Nigeria Olayemi Cardoso says the naira’s recent sharp rise is a positive verdict on policy action to curb inflation, not because the authorities have been intervening in its support.

A Bloomberg report this week said Nigeria was burning through its foreign exchange reserves at a rate not seen in four years, raising concerns that the central bank was depleting its dollar holdings to support the naira after pledging it would allow the currency to float more freely.

That’s the biggest decline in a similar period since April 2020, according to data compiled by Bloomberg.

“It is not our intention to defend the naira,” Cardoso said on Wednesday during an event at the spring meetings of the International Monetary Fund and World Bank in Washington. “The shifts you’ve seen in our reserves have really little or nothing to do with defending any naira and that’s certainly not our objective.”

Cardoso, who took the job in September 2023 after a long career as a private sector banker, played down the shift in reserves and said that about $600 million had flowed into the account in the last two days.

“We are looking toward ensuring that we have a market that operates on its own: Willing buyer. Willing seller. Price discovery,” he said. “Ultimately, I perceive a future where the central bank will really not need to intervene except in very, very unusual circumstances. What is important to us is that there’s sufficient liquidity in the market.”

The currency of Africa’s largest oil producer has recovered most of its losses since a 43% devaluation in January. The move follows 600 basis points of monetary tightening in February and March and a raft of other steps by the central bank to improve local dollar liquidity and clear a $7 billion backlog of foreign currency orders.

Rather, Cardoso said the rise in the currency was a sign that the central bank had convinced investors that it was willing to do whatever was necessary to stabilize inflation.

The turnaround in the naira’s fortunes has been a roller-coaster. After years of being pegged at an artificially strong level against the dollar, foreign exchange reforms in June began a decline that at one point had wiped more than 70% from its value against the greenback before it began to rally in mid-March.

“When I started, we had a situation where within a month or two we were regarded as having the worst performing currency of any country,” he said.

“Six months later we are judged to have the best performing currency of any country. I think those things speak for themselves.”