After years of unconventional policy experimentation and heavy central bank interventionism, Nigeria has begun one of the most sweeping monetary reforms in its modern economic history. Since the appointment of Olayemi Cardoso as Governor of the Central Bank of Nigeria (CBN) in September 2023, the apex institution has pivoted away from development finance-led strategies to adopt a more orthodox, disciplined approach to monetary governance.

Cardoso’s leadership comes at a critical moment. Nigeria faces severe macroeconomic headwinds—soaring inflation, a weakening currency, declining productivity, and structural instability. Yet, despite the immediate hardships, the central bank’s new direction could pave the way for lasting economic transformation and renewed investor confidence.

A Radical Departure From Emefiele’s Era

For nearly a decade under former governor Godwin Emefiele, the CBN blurred fiscal and monetary boundaries through expansive interventions, including lending to various sectors. However, Cardoso has drawn a clear line. In April 2024, he asserted, “Monetary policy is necessary but not sufficient,” signaling a return to transparency, fiscal restraint, and market discipline.

This strategic recalibration became evident in early 2024 when the Monetary Policy Rate (MPR) shot up from 18.75% to 24.75% in just two months—an aggressive move aimed at taming inflation, which reached a 30-year high of 33.69% in April. Simultaneously, the Cash Reserve Ratio (CRR) surged to 45%, ranking among the highest globally. Cardoso admitted the difficulty of these decisions but emphasized their necessity in rebuilding monetary credibility.

Inflation Drivers: Insecurity, Subsidy Removal, and Currency Instability

At the heart of Nigeria’s inflation problem lie three major disruptors:

1. Agricultural insecurity in the North-East and North-Central has crippled food production, leading to food inflation exceeding 40%.

2. The removal of petrol subsidies in May 2023, though praised by economists, triggered a sharp rise in transport and logistics costs, escalating inflation.

3. Exchange rate liberalization—arguably the boldest reform—merged Nigeria’s multiple exchange rate windows in June 2023, ending decades of arbitrage opportunities. This caused the naira to plunge from N460/$ in May 2023 to N1,300/$ in April 2024, with the currency now trading around N1,638/$ as of May 2025.

The CBN also exited its previous role as the dominant foreign exchange provider, allowing the naira to float more freely. While this introduced short-term volatility, market observers now see early signs of stabilization. The gap between official and parallel market rates has narrowed, and foreign investors are cautiously re-entering, encouraged by attractive interest-bearing securities.

A More Transparent, Technocratic Central Bank

Cardoso’s administration has significantly improved the CBN’s communication strategy. Quarterly Monetary Policy Committee (MPC) meetings are now data-rich, clearly explained, and immediately followed by press briefings—breaking from a tradition of ambiguity and policy inconsistency.

Additionally, fiscal and monetary authorities now meet quarterly to align objectives, particularly in managing debt levels and drawing in capital. This newfound synergy represents a critical step toward macroeconomic coherence.

Yet, Cardoso has acknowledged the central bank’s limitations. “Monetary policy alone cannot resolve inflation driven by structural issues,” he emphasized, echoing experts such as Professor Pat Utomi, who warned that without investments in security, energy, and logistics, Nigeria risks addressing symptoms rather than root causes.

Banking Sector Reforms and Fintech Regulation

In January 2024, the CBN launched a bold recapitalization initiative. It directed:

• Tier 1 banks to increase minimum capital to N500 billion.

• Tier 2 banks to raise their capital base to N200 billion.

This move aims to create shock-resistant institutions and ensure Nigerian banks remain globally competitive.

Simultaneously, the CBN expanded oversight of the booming fintech sector. It rolled out:

• New Know Your Customer (KYC) requirements.

• Mandatory real-time transaction monitoring.

• Enhanced cybersecurity compliance protocols.

These initiatives are intended to manage systemic risk and secure digital financial systems amid rapid expansion.

Mixed Results: Wins and Wounds

There are early signs of recovery. By clearing a $7 billion FX backlog, the CBN has improved foreign investor confidence. Nigeria’s external reserves now hover between $33–34 billion, equating to approximately five months of import cover.

But the human and business toll is significant. Prime lending rates have surged to between 28% and 35%, limiting access to credit. Manufacturing has contracted due to higher borrowing costs and currency depreciation, with the Purchasing Managers’ Index (PMI) falling below 50—a sign of economic contraction.

Meanwhile, GDP growth slowed to 2.31% in Q1 2024, down from 3.46% in Q4 2023, failing to keep pace with population growth (2.5%). This means real incomes are shrinking, worsening poverty, which already affects over 60% of the population.

What Comes Next: Structural Reform or Stagflation?

While Cardoso’s measures have laid the foundation for stability, they are not silver bullets. Sustained recovery will require urgent action on:

• Agricultural revival to ease food inflation.

• Infrastructure upgrades, especially in energy and transport.

• Boosting crude oil output to capitalize on international prices.

• Fiscal discipline to cut deficits and fund development.

International institutions, including the IMF, have cautiously welcomed the CBN’s reforms. “Nigeria is doing the hard work now,” said one IMF economist. “But the dividends depend on sustained effort and political will.”

A Delicate Balancing Act in 2025

The year ahead will determine whether the central bank’s tightrope walk succeeds. The CBN remains committed to striking a balance between macroeconomic stability and avoiding a deep recession.

In Cardoso’s words: “Nigeria’s path is not linear. But with discipline and coordinated action, the foundation we lay today can support a future of sustained, inclusive growth.”

Indeed, Nigeria’s current monetary overhaul represents one of the boldest and most consequential resets in its post-independence economic history. While short-term pain is undeniable, the reforms—if supported by structural interventions—could finally break the cycle of volatility that has long defined Nigeria’s economy.

Ultimately, this transformation will not be judged merely by inflation rates or naira exchange levels, but by whether ordinary Nigerians begin to feel renewed hope, restored purchasing power, and real opportunity in their daily lives.