Three years after Olayemi Cardoso assumed office as Governor of Nigeria's Central Bank, the institution has recorded significant improvements in foreign reserves, currency-market transparency, and financial-sector stability. However, challenges persist, including expensive credit, a weaker naira, and slow transmission of macroeconomic indicators to businesses and households. When Cardoso took charge in September 2023, the bank faced overlapping crises, including high inflation, a high Monetary Policy Rate, and low gross external reserves.
Cardoso's response was to return to conventional central banking, scaling back development financing, tightening monetary conditions, and reducing discretionary foreign exchange allocation. The CBN also raised capital requirements for banks. As a result, reserves have climbed above $55bn, the foreign exchange market has become more transparent, and banks have raised trillions of naira in fresh capital. Despite these gains, interest rates remain high, and the naira is substantially weaker than in 2023.
Cardoso's most significant shift was returning price stability to the center of monetary policy. The CBN reduced direct interventions and concentrated on inflation, liquidity management, and financial stability. The bank recently defended its return to orthodox monetary policy, citing blurred institutional responsibilities and reduced transparency under the previous approach. The CBN observed that the foreign exchange market was opaque and inefficient, while weak fiscal-monetary coordination constrained economic outcomes.
The Monetary Policy Committee (MPC) raised the Monetary Policy Rate (MPR) several times, from 18.75% in September 2023 to 27.50% in November 2024. The tightening cycle began reversing in September 2025, with a 50-basis-point reduction to 27%. The MPR was retained in November before another reduction to 26.5% in February 2026. In September, the MPC reset the MPR to 23% and recalibrated the Standing Facilities Corridor.
Headline inflation peaked at 34.80% in December 2024 but stood at 15.39% in August 2026, according to the National Bureau of Statistics. However, the inflation rate series was rebased in January 2025, making the old and new series incomparable. The rebased series indicates moderating inflationary pressure, with inflation easing from 15.93% in May to 15.39% in August.
The next challenge is transmission, with commercial lending rates exceeding 30% in parts of the market during the tightening cycle. Private-sector credit increased by 8% from N74.63tn in April 2025 to N80.59tn in April 2026. However, credit to the government jumped 65.4% from N23.93tn to N39.60tn. The Chief Executive Officer of the Centre for the Promotion of Private Enterprise, Muda Yusuf, warned that rising government borrowing is crowding out businesses.
The foreign exchange market has shown improvement, with the CBN clearing all valid outstanding obligations and introducing the Electronic Foreign Exchange Matching System. The bank also revised regulations for Bureau de Change operators and strengthened reporting requirements. Despite substantial depreciation, external buffers strengthened substantially, with gross reserves increasing from $33.2bn to over $55bn.
Key points
- The CBN's reforms have led to significant improvements in foreign reserves and currency-market transparency.
- Challenges persist, including expensive credit and a weaker naira.
- The transmission of improving macroeconomic indicators to businesses and households remains a challenge.
