. Naira stability, lower inflation signal working reforms, says CBN
. CBN defends tight monetary policy, sees confidence returning to FX and banking sectors
Learning from past recapitalisation exercises and mistakes made in the past, the Governor of the Central Bank of Nigeria (CBN), Yemi Cardoso, has disclosed that the recapitalisation process was designed to be flexible, allowing banks to merge, downgrade, or upgrade their licences based on their strategic positioning.
He noted that as new banking categories emerge from the recapitalisation process, institutions will be better positioned to channel credit to sectors that align with their strengths.
“This is not a disruptive process. We have given banks enough time and options to meet the requirements.
There’s no need for panic,” he explained.
In another response to access to credit and sequencing of the reforms and high interest rates, and limited access to credit for real-sector businesses, the governor stressed that economic stability must precede sustainable lending.
“Without stability, you can’t have meaningful growth. Interest rates are high, yes, but as stability returns, they will adjust. The banks now have stronger capital positions and fewer incentives for speculative arbitrage. They can focus more on core business lending,” he said.
Cardoso also reiterated the Bank’s commitment to orthodox monetary policy as the anchor for restoring economic stability, curbing inflation, and strengthening investor confidence in Nigeria’s financial system.
Speaking at a policy dialogue hosted by the London Business School and supported by JP Morgan and Goldman Sachs, the Governor said the decision to return to orthodox policy measures, which is centred on interest rate adjustments and liquidity management, was deliberate and necessary to correct past distortions in the economy.
His words: “We came into a situation where we had gone out of orthodoxy. That created enormous challenges with extreme liquidity overhang and funding not going into productive sectors. So, we decided the best thing to do was to stay with orthodox monetary policy, and we did that. Happily, the situation has responded, and inflation is gradually beginning to ease.”
He noted that recent data have shown a positive response to these measures, with headline inflation beginning to moderate and market confidence gradually returning, insisting that the reforms have contributed in no small way to the gradual easing of inflation.
On FX market stability and improved access, the apex bank chief stressed that stability in the foreign exchange market remained a key achievement of recent reforms, noting that Nigerians are now able to access foreign exchange more predictably for education, trade, and business transactions.
He added: “Our currency is now more competitive, contributing to a positive trade surplus. Nigerians are more comfortable that, irrespective of the fact that the Naira has devalued, it is now stable and predictable.”
Cardoso further explained that the predictability in the FX market has reduced the speculative rush that previously fuelled exchange rate volatility.
“People no longer have to front-load their demand for dollars out of fear. That’s all out of the window now,” he stated.
While responding to a question on the impacts of the banking sector reforms and recapitalisation drive, the governor emphasised that the move was proactive, designed to strengthen financial institutions’ buffers and align their capital base with current macroeconomic realities.
“We saw where things were going and felt banks needed to recapitalise in line with the currency devaluation,” he said. “There was cynicism initially, but it has become obvious that it was the right decision. The response from the market and the Nigerian Exchange has been very positive.”
Also on innovation, risk, and the future of finance, the CBN governor acknowledged the role of financial innovation, including digital assets, in shaping the future of finance, but emphasised the need for cautious regulation.
His explanation: “We recognise that innovation is good, but there are also risks. We must take time to understand those risks and ensure proper regulation to protect people and the financial system.”
He reaffirmed that the central bank remains committed to building a stable, transparent, and innovation-friendly monetary environment that supports inclusive growth and sustainable development.
