The Governor of the Central Bank of Nigeria (CBN), Olayemi Cardoso, has reaffirmed the apex bank’s commitment to maintaining monetary stability through stringent policy measures and proactive oversight.
Speaking at the 2025 Monetary Policy Forum on Thursday, themed “Managing Disinflation Process,” organised by the apex bank, Cardoso outlined the challenges and progress made in Nigeria’s monetary policy landscape.
Cardoso said “Achieving monetary policy stability requires sustained vigilance and a proactive monetary policy stance. And I can assure you we will tighten our vigilance on the market.”
According to the CBN Governor, the past year has been marked by persistent inflationary pressures driven by both global and domestic shocks. Despite these challenges, he highlighted measurable progress in stabilizing the country’s foreign exchange market and increasing foreign reserves.
“The past year presented significant challenges, including consistent inflationary pressures exacerbated by global and domestic shocks. In spite of these challenges, our commitment to price and monetary stability yielded measurable progress. We have seen relative stability in the foreign exchange market, a reduction in the foreign exchange rate disparity, and a rise in foreign reserves to over $40 billion as of December 2024 – the highest in three years,” Cardoso said.
However, he acknowledged that domestic structural challenges, exchange rate fluctuations, and energy price adjustments continue to exert pressure on prices and economic activities. He noted that while structural factors play a key role in Nigeria’s inflation, monetary dynamics have also contributed to price pressures.
Impact of Excess Liquidity and Monetary Policy Response
Cardoso pointed out that liquidity injections, especially those linked to unorthodox monetary policies since the COVID-19 pandemic, have contributed to inflationary pressures and foreign exchange volatility.
“The liquidity injections associated with unorthodox monetary policies, particularly since the COVID-19 pandemic, have created a significant overhang. While these measures were intended to cushion economic shocks, they did not translate to commensurate productivity growth. Instead, they fueled inflationary pressures and heightened foreign exchange volatility,” he explained.
- He further noted that excess naira liquidity in the system has amplified demand-driven inflation, which has been worsened by supply-side constraints. This, he stressed, demonstrates the need for discipline and a coordinated approach to monetary policy to restore stability.
“Excess naira liquidity in the system has amplified demand-driven inflation, further exacerbated by supply-side constraints. This dynamic underscores the importance of discipline and a coordinated approach in monetary policy to restore stability,” Cardoso added.
- In response, the CBN initiated a tightening cycle through orthodox approaches. Throughout 2024, the Monetary Policy Committee (MPC) implemented various policy measures, including adjustments to the monetary policy rate, to curb inflation and stabilize the economy.
Outlook for 2025
Looking ahead, Cardoso expressed optimism that Nigeria is on the path to economic stability and disinflation. However, he stressed the importance of bold policy measures to consolidate the gains made so far.
“As we move forward into 2025, I am optimistic that we are in the process of turning a corner and that disinflation is within reach. However, we must remain committed to bold policy measures to consolidate our progress,” he stated.
- To further strengthen the financial sector, the CBN recently introduced a new minimum capital requirement for banks, set to take effect in March 2026.
- According to Cardoso, this policy aims to enhance the resilience and global competitiveness of Nigeria’s banking sector, positioning it to support the government’s ambition of a $1 trillion economy.
“We have introduced a new minimum capital requirement for banks – effective March 2026 – to strengthen the resilience and global competitiveness of the banking sector, positioning it to support the $1 trillion economy,” he noted.
Reaffirming the apex bank’s commitment to monetary stability, Cardoso assured that the CBN will maintain a watchful eye on market trends and take necessary steps to ensure stability in the financial sector.
