In some of the episodes in this column, I have made a few common-sense predictions that came to pass and suggestions that were implemented by the apex bank. The reality of those suggestions becoming actionable policies served as a tonic and motivation for me to further put CBN in focus and Olayemi Cardoso whom I had not met but have developed a personal interest in, due to his visionary leadership. Someday, I would like to meet and greet him. A thank you and words of encouragement will be in order. In my estimation, he is one of the shining stars and new revelations of President Tinubu’s administration. Whether we can trust him and his team with the monetary policy is no longer in question. He has shown rare courage, visionary and strategic thinking, and independence devoid of political consideration in executing difficult tasks that align with the vision of the current administration to ensure economic growth. His economic expertise, analytical skills, adaptability, strong leadership traits, and ability to communicate the bank’s policies clearly to stakeholders and the public stand him out. His integrity and credibility as a leader and proactive approach to identifying potential risks and implementing appropriate measures collectively contribute to effective governance of the Central Bank, helping to ensure monetary stability and support economic growth.
In a particular episode, I lamented that the apex bank has become a toothless bull-dog. I urged the bank to execute what I called the 3Bs”: ‘Bark and Bite the Banks’ if it must stabilise the economy and pull the Naira from the brinks.
For too long, DMBs have taken Nigeria for a ride due to their insatiable risk appetite thereby sabotaging the monetary policy and causing attendant economic woes. I reckoned that for the economy to turn the curve, DMBs must sit up and serve as partners in progress with the CBN and not a destabilising agent. I argued that CBN must make the banks to understand that her regulations are meant to be obeyed, otherwise there will be severe consequences. The DMBs can get sanctioned either as corporate bodies or individual directors for economic crimes.
I submitted that 70 per cent of our economic woes are inflicted by the uncontrolled risk appetites of banks, who would rather choose a slap on the wrist than comply with regulations. Even though the prescribed sanctions for violations were small, the regulators were often unwilling to wield the stick. Why?
For many years, the DMBs, under the Bankers Forum, infiltrated the CBN and hijacked the soul of the apex bank. In the breach, all known rules were observed, and their compliance at zero level.
In that episode, I highlighted that self-regulation, which is a post-modernist proposition of social scientists backed by bankers, has failed. A serial violator with no respect for rules and no fear of consequence will not comply with the law particularly where the regulator is a willing collaborator.
The proponents of self-regulation assumes that bankers who prefer profiteering will be reasonable to monitor their adherence to legal, ethical, or professional standards rather than have an outside independent agency oversight her. That may work elsewhere but not in Nigeria. I am still searching for the data for the number of DMBs that were penalised by the Bankers Forum for monetary policy violations. Monetary policy rules mean nothing when they are neither respected nor obeyed. Therefore, CBN must police the banks or they will continue to sabotage the economy.
It is therefore cheering to find CBN summon the courage to bite DMBs. The apex bank imposed a fine of N150 million on major DMBs in Nigeria which will be deducted from their deposit with the Central Bank. Weeks later, CBN doubled down and placed another round of sanctions on DMBs engaged in illegal and fraudulent transactions.
CBN has finally woken up. Since December 2024, when it wielded the sticks on the banks and followed sustained reforms, the Naira has appreciated in the official market. At the time of writing this article, the Naira was trading at N1,474 to the dollar. Data from the official FMDQ Securities Exchange trading platform revealed that the Naira gained almost N64 between December 2024 and the end of January 2025, its strongest in one year. According to Cardoso who pledged to sustain continued cash flow and tighter monetary policy, the Naira’s strengthening may decrease inflation from 25 to 15 per cent in 2025.
Under Cardoso, the Central Bank of Nigeria has implemented a series of bold reforms aimed at stabilizing the Naira which has faced significant volatility in recent years. These reforms are designed to enhance the Foreign Exchange (FX) Market efficiency. Many economists already forecast that a strong and stable Naira has the potential to attract foreign investments. And ultimately restore confidence in the currency and decrease inflation.
The CBN is set to introduce an electronic FX matching system to improve transparency and efficiency in the foreign exchange market. This system aims to address the disconnect between the naira’s value and market realities, thereby enhancing liquidity and market confidence.
The bank is also Phasing Out High-Interest FX Swaps. The initiative will see the phasing out of high-interest foreign exchange swaps, which has helped stabilize financial markets. By settling a significant portion of FX forward obligations, the CBN has boosted liquidity, which is crucial for maintaining a stable exchange rate.
Encouraging FX Inflows: The CBN has actively encouraged foreign exchange inflows to support naira stability. This includes measures that have led to a surge in total inflows, reflecting a growing investor confidence in the Nigerian economy.
Reforms in the FX Market: Recent reforms in the FX segment have made the naira more competitive and reflective of its real value. The CBN governor has noted that these reforms have attracted foreign investors, indicating a positive shift in market sentiment.
Maintaining Robust External Reserves: The CBN has focused on maintaining strong external reserves, which are essential for supporting the naira’s value. This strategy is part of a broader effort to ensure that the currency can withstand external shocks and fluctuations in the global economy.
Despite these efforts, the naira has experienced periods of volatility, and the CBN acknowledges that the battle to stabilise the currency is ongoing. The central bank’s strategies are continuously evaluated to address the underlying causes of currency instability, and there is cautious optimism regarding potential improvements in capital flows to emerging markets as global economic conditions evolve.
In summary, the CBN’s bold reforms, including the introduction of new systems, encouragement of foreign investment, and maintenance of external reserves, are crucial steps toward stabilizing the naira and restoring confidence in Nigeria’s economic landscape. Note that Nigeria’s FX reserves declined significantly by $1.16 billion in January 2025, wiping out the $592.58 million gain recorded in December 2024. The latest figure filed by CBN shows the reserves fell from 40.88 billion at the end of December to 39.72 billion by the end of January 31, 2025. This marks the sharpest monthly decline since April and raises concerns about the country’s external liquidity position.
The CBN can safely mitigate and navigate the impact of the decline by diversifying its revenue sources, enhancing foreign direct investment, transparent communications, monitoring capital flows and if possible exploring emergency measures such as seeking assistance from multilateral institutions to bolster reserves and stabilise the economy. Most importantly, the bank can also collaborate with the government to ensure sound fiscal policies that enhance revenue generation to build back the reserves over time