The Central Bank governor has championed reforms at the apex bank. Are they paying off, asks Dulue Mbachu.
When Nigerian President Bola Tinubu decided to apply shock treatment to the comatose Nigerian economy in 2023, one of the specialists he brought to attend to the patient was Olayemi Cardoso.
A career banker who had a long stint with Citibank Nigeria, Cardoso had been part of Tinubu's team as the governor of Lagos between 1999 and 2007. And as the ripples caused by Tinubu's abrupt ending of decades of fuel subsidies and decision to float the exchange rate coursed through the economy, it fell on Cardoso to manage their most telling effect: runaway inflation.
"I understand that many of you have concerns about the current state of our economy," Cardoso said at his first dinner with bank executives a month after taking office. "By taking appropriate corrective actions and strategic steps, we can restore macroeconomic stability and address fundamental flaws."
He took over as governor of the Central Bank of Nigeria (CBN) at a time when the institution was at a crossroads about its true mission. Under Cardoso's predecessor, Godwin Emefiele, the bank had taken on more of the role of a development bank than that of a monetary policy regulator, intervening in many areas of the economy. Emefiele oversaw a multiple exchange rate system that was widely criticised as opaque, and became so embedded in politics that he joined the ruling party, spurned central bank independence and openly contemplated succeeding former President Muhammadu Buhari in 2023.
Cardoso chose a different path and has since returned the CBN to its more traditional role as the guardian of monetary policy focused on managing price pressures. The pivot has been thorough-going and detailed, even including changing the format for delivering the decisions of the Monetary Policy Committee (MPC). Where Emefiele opened with a long preamble, only getting to the decisions towards the end, Cardoso now opens with the decisions before explaining the rationale, an approach that supporters say prioritises transparency.
From the beginning, Cardoso demonstrated a willingness to take tough decisions. Taking over at the CBN in October 2023, he deferred the next MPC meeting to February 2024 while doing his initial housekeeping. Then he led the committee into a tightening cycle that saw five consecutive rate increases, bringing the monetary policy rate to a record 27.5% by the end of that year.
Price pressures didn't let up, with inflation reaching 34.6% year-to-year by the end of 2024, its highest in almost three decades. The Cardoso-led CBN held its nerve and kept the benchmark interest rate at its peak for most of the year. It only relented in September when it reduced the rate to 27%, and again on February 24, when it was cut to 26.5%. By then the inflation rate, with the help of a rebasing exercise undertaken by the National Bureau of Statistics from January last year, had eased to 15.1%.
The numbers suggest that Cardoso's tightening stance has brought back macroeconomic stability to Nigeria. Apart from inflation, the foreign exchange market has seen the naira clawing back significant gains from the losses the currency recorded as it went into a free fall following the initial float in 2024. It is also supported by gross foreign reserves that recently crossed the $50bn mark, the highest in thirteen years. For the first time in more than a decade, there is near convergence of the official and parallel market exchange rates.
One of the least cited benefits of Cardoso's reforms is Nigeria's removal from the Financial Action Task Force's "grey list" of countries with strategic deficiencies in countering money laundering and terrorist financing.
The CBN under Cardoso has also set new capital thresholds which banks operating in Nigeria have been given two years to meet. The time will be up at the end of March, and, at the last count, 20 out of 33 licensed banks had met the requirements, according to the Central Bank.
A major criticism of Cardoso's reforms is that they resulted in a credit squeeze for the real sectors of the economy given the high cost of borrowing. Banks, afraid to acquire more non-performing loans, chased yields instead. A majority of the banks routed their excess cash to the CBN's Standing Deposit Facility that guaranteed risk-free high interest rates rather than lend to the private sector, swelling it to N336.2 trillion at a point in 2025.
"The manufacturing and agricultural sectors, particularly the small and medium businesses, bore the brunt of the tight monetary policy," says Eric Orji, a Lagos-based economist and market analyst. "The banks had a good time."
Capital importation data shows a surge in investment flows. As much as $5.64bn in fresh capital flowed into Nigeria in the first quarter of 2025, an increase of 67% from the $3.38bn imported in the corresponding period in 2024. The trend continued in the second quarter with an inflow of $5.1bn. Though 9.24% lower than the first quarter, it was a 96.6% jump on the same period in 2024. A resurgence in the third quarter saw the capital flows reaching $6bn, almost a fourfold increase from the amount recorded in the third quarter of 2024.
A vast majority of the inflows were yield-chasing investments in money market instruments, bonds or stocks. In the first quarter, such investments accounted for more than 90% of the imported capital, a figure that dropped to 70% in the second quarter. Only 12.9% of the funds went into foreign direct investment, but it still represents a more than threefold increase from a year earlier.
Cardoso acknowledges the current shortage of "patient capital" but portrays the tough reforms as a reset necessary to position Nigeria for real economic growth. Having achieved the necessary macroeconomic stability, the regulator is now focused on supporting credit growth through "vigorous supervision and strong governance" while making the stability of prices durable, Cardoso told the recent bankers' dinner in November.
"Nigeria is more resilient to external shocks today than at anytime in our recent history," he said.
This special report was produced with the support of the Central Bank of Nigeria. The editorial was produced independently of the CBN or the government.