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The Central Bank of Nigeria (CBN) says it is prepared to take steps to prevent the large amount of money expected to circulate during the 2027 elections from pushing up inflation.
CBN Governor, Olayemi Cardoso, disclosed this while answering questions from journalists after the Monetary Policy Committee (MPC) meeting in Abuja.
He said the apex bank had studied different ways election spending could affect the economy and was ready to withdraw excess money from circulation if necessary.
The MPC recently cut the benchmark interest rate, known as the Monetary Policy Rate (MPR), by 3.5 percentage points, from 26.5 per cent to 23 per cent. It was the biggest single rate cut in the bank’s history.
The committee also adjusted the range within which interest rates can move around the new benchmark rate, while keeping the cash reserve requirement for deposit money banks at 45 per cent.
The cash reserve requirement is the portion of customers’ deposits that banks must keep with the CBN rather than lend out.
Despite the interest rate reduction, Cardoso said the bank remained focused on controlling inflation and protecting the improvement recorded in recent months.
The governor explained that election campaigns, government spending and other election-related activities could lead to more money entering the economy.
When too much money is chasing too few goods and services, prices can rise. This could make it harder for the CBN to control inflation and maintain stability in the foreign exchange market.
Cardoso said the CBN would closely monitor the situation and take action when necessary.
“The CBN is ready and I can tell you that we have done a lot of analysis in understanding how this market transforms itself during an election period,” he said.
He added that the bank had examined different scenarios and models to understand the possible impact of election spending on the economy.
“Hence, we will closely monitor currency in circulation, banking system liquidity, monetary aggregates and foreign exchange demand during the period, and our decisions would be guided by data rather than assumptions,” Cardoso said.
He explained that the CBN would deploy its monetary policy tools to remove excess money from the banking system if election spending threatened to increase inflation.
The governor also said the Nigerian economy was expected to maintain its growth in the remaining part of 2026, supported by improvements in crude oil production, agriculture and other business activities.
He pointed to the Purchasing Managers’ Index (PMI), an indicator that measures business activity, as one of the signs of continued economic expansion.
According to him, inflation could continue to slow in the short to medium term, supported by a more stable foreign exchange market, the delayed effects of previous interest rate increases and improved food supplies as the harvest season progresses.
However, Cardoso identified prolonged tensions in the Middle East and election-related spending as possible threats to the inflation outlook.
He said the CBN would also ensure that enough cash was available to Nigerians, while warning against the misuse of currency and violations of existing cash-related regulations.
The governor stated that the bank would strengthen its monitoring activities and work with law enforcement agencies to prevent abuse of the currency system.
He also encouraged Nigerians to use electronic payment channels because they provide records of transactions and make it easier to track the movement of money.
Cardoso described the recent interest rate reduction as a “reset and recalibration,” explaining that it was intended to bring the policy rate closer to prevailing economic conditions rather than simply signal a move towards cheaper money.
He said the CBN’s immediate priority was to ensure that the rate cut helped reduce lending costs for businesses and individuals without triggering another rise in inflation.
As Nigeria approaches the 2027 general elections, the apex bank is therefore preparing to manage any increase in money circulation that could undermine the progress made in stabilising the economy.
