Beyond Naira Stability

Three years after inheriting a weakened monetary system, CBN Governor Olayemi Cardoso is seeking to turn stability into cheaper capital and stronger growth, writes James Emejo. In the past, the focus was on stopping inflation and rebuilding reserves, but now the central bank is considering if its machinery needs recalibration. Inflation has fallen to 15.39%, and the foreign exchange market is more stable with reserves above $55 billion.

However, the policy rate has become detached from market rates, making monetary policy less effective. The Monetary Policy Committee decided to reset the Monetary Policy Rate by 350 basis points to 23%. This move is not an abandonment of the restrictive policy, but rather a change in how it is implemented. The CBN aims to close the gap between policy signals and market reality, strengthening transmission and ensuring their decisions influence the financial system.

The foreign exchange market reform has been a significant part of the reset, removing distortions and improving transparency. Remittance inflows from Nigerians abroad have also increased, providing a buffer against lower domestic yields. The banking sector has undergone reconstruction with significant domestic capital mobilization, indicating the existence of domestic savings and investment capacity in Nigeria when confidence and institutional structures are strong.