Kudos, as CBN reforms mark a turning point for Nigeria’s, monetary stance, economy

By Onu Okorie

The recent reforms going on under the watch of the Central Bank of Nigeria CBN Governor Mr, Olayemi Cardosor is  both significant and instructive. 

This is given that for decades it’s the first time that the Central Bank has undertaken such most consequential monetary and financial sector reforms.

However, analysts have argued that these measures have not only strengthened policy credibility but have also repositioned Nigeria in the eyes of global investors.

At the heart of reforms is the CBN’s decision to clear more than $7 billion in inherited foreign exchange obligations. Although the development received relatively little public attention compared to other reforms, its significance extends far beyond the financial sector.

According to a financial analyst, Professor Uche Uwaleke, the outstanding foreign exchange obligations had become a major source of uncertainty for international investors and businesses operating in Nigeria. Hence the it was a remarkable positive sign for global partners.

Before now, as companies struggled to repatriate funds, it makes potential investors to question the country’s ability to honour its commitments. 

“By settling the backlog, the CBN effectively removed one of the biggest impediments to restoring confidence in Nigeria’s foreign exchange market.

“In international finance, credibility is a valuable asset. Countries that honour their obligations are more likely to attract foreign investment, secure favourable financing terms and build long-term relationships with global financial institutions.” Prof Uwaleke stated.

He also believes that the clearance of the foreign exchange backlog sent a clear signal to the international community about trust and confidence in Nigeria’s financial system.

Another reform that has set the government of President Bola Ahmed Tinubu apart in it’s monetary policies is the discontinuation of Ways and Means financing of the Federal Government.

For years, economists expressed concern over the extensive use of central bank financing to fund government deficits. Such financing often expands money supply, weakens monetary discipline and complicates efforts to control inflation. 

From the onset, the CBN made it clear that put an end to the policy, which was highly criticised when the previous administration introduced it. 

Analysits viewed the decision to end the practice as a defining moment in restoring the credibility of monetary policy. 

Speaking on the issue, a public policy analyst, Professor Christopher Kalu of Economic Department, Nnamdi Azikiwe university Awka, explained that beyond reinforcing the independence of the Central Bank, action of CBN Governor signals a commitment to fiscal discipline by drawing a clearer line between government spending and monetary management.

According to him, “for investors, policy credibility matters as much as economic performance. Stable and predictable monetary policy reduces uncertainty and strengthens confidence in the broader economy.”

Another outstanding reforms that has enhanced the credibility of the CBN recent policies is the successfully completion of the recapitalisation of Nigeria’s banking industry.

Industry watchers who support the policy, believe that stronger banks will be better equipped to finance large infrastructure projects, support industrial development and compete effectively within Africa’s increasingly integrated financial system. According to Prof Uwaleke, “the significance of recapitalisation goes beyond increasing banks’ balance sheets. It is about expanding their capacity to finance economic transformation.”

“Large-scale investments in energy, manufacturing, transportation and infrastructure require financial institutions with sufficient capital to support long-term lending. By strengthening the banking sector, the CBN is laying the financial foundation for broader economic growth.”

Many analysts have also given kudos to the CBN’s foreign exchange market reforms with improving liquidity and encouraging renewed foreign capital inflows.

It has been argued that the Nigeria’s foreign exchange market had long been characterised by multiple exchange rates, inadequate liquidity and investor uncertainty. But the recent reforms have sought to create a more transparent and market-driven system capable of attracting both portfolio and long-term investments.

It’s argued that these reforms have contributed to rising external reserves, improved investor confidence and enhanced Nigeria’s standing among international investors. As at last counts, Nigeria’s gross foreign exchange reserves stand at approximately $51.29 billion, reaching their highest levels in over 15 years. This milestone bolsters the capacity of the CBN to support the Naira and meet international payment obligations.

The positive responses from major global rating agencies further reinforce the perception that the country’s monetary reforms are beginning to restore confidence in its economic management.

However, the academics are careful not to portray these achievements as an end in themselves.

While commending the Central Bank for maintaining a disciplined and data-driven monetary policy, CMAN argues that inflation in Nigeria is increasingly driven by structural challenges, including insecurity, weak infrastructure, energy shortages and supply chain disruptions. Under such conditions, the body advises that monetary policy should gradually rely less on repeated increases in the Monetary Policy Rate as inflation expectations improve.

Ultimately, the assessment of the reforms initiated by Cordoso reflects a nuanced understanding of Nigeria’s economic situation. There no doubt that restoring confidence in the financial system is a prerequisite for sustainable growth, which would ultimately translate to the improved living standards.

Their message is clear: the Central Bank has succeeded in rebuilding confidence through bold and coordinated reforms. The next phase of Nigeria’s economic journey will depend on how effectively those gains are converted into inclusive growth that benefits businesses, investors and ordinary Nigerians alike.