CBN's Strategic Reforms Yield Positive Results
The Central Bank of Nigeria has made significant progress in stabilizing the country's financial markets, according to recent assessments presented during last week's Monetary Policy Committee meeting and Bankers' Night. Governor Yemi Cardoso engaged Nigerians on the journey toward building a more resilient financial system while highlighting areas requiring further attention for inclusive economic growth.
Naira Stability and Market Recovery
The Nigerian naira has demonstrated remarkable stability, trading around the N1,440/$ band over the past week. This represents more than temporary calm in Nigeria's traditionally volatile foreign-exchange landscape, indicating a market gradually returning to equilibrium after months of disruption. Unlike previous short-lived rallies driven by offshore inflows or policy surprises, the current stability reflects a healthier balance between demand and supply.
By the week's end, the currency strengthened by 0.69 per cent at the official window to close at N1,446.74/$, while the parallel market softened slightly to approximately N1,470/$. These developments occurred against the backdrop of improving liquidity and growing market confidence, supported by an uptick in external reserves which now stand at $44.56 billion – representing a 0.68 per cent week-on-week increase.
The monetary authority's reaffirmation of the willing-buyer, willing-seller framework has been crucial in underpinning improved market liquidity. The Monetary Policy Committee's signal favoring minimal direct intervention and a return to market-driven price discovery has helped anchor expectations following a period of reactive, sentiment-led trading.
Broader Economic Improvements
The positive market signals coincided with a broader recovery narrative articulated by the apex bank during its 303rd MPC meeting. The committee maintained the benchmark interest rate at 27 per cent, noting that earlier tightening measures are now yielding results, particularly in controlling inflation.
Inflation has plunged from a peak of 34.6 per cent in November 2024 to 16.05 per cent by October 2025 – marking seven consecutive months of disinflation. Food inflation has decreased sharply to 13.12 per cent, while core inflation has also shown significant easing.
Speaking at the Chartered Institute of Bankers of Nigeria's 60th Dinner, Cardoso contrasted current conditions with the challenging situation inherited in late 2023, which featured a paralyzed FX market, a $7 billion backlog, a parallel-market premium exceeding 60 per cent, and entrenched inflation. He emphasized that the return to orthodox monetary policy, including ending deficit-monetizing ways and means financing and rebuilding rule-based FX operations, formed the foundation of current stabilization efforts.
Nigeria's external reserves have risen to $46.7 billion as of mid-November – the highest level in nearly seven years – providing 10.3 months of import cover. Importantly, Cardoso stressed that this reserve accumulation is organic, driven by market inflows rather than borrowing.
Foreign capital inflows have surged to $20.98 billion in the first ten months of 2025 – a 70 per cent increase over 2024 and more than quadruple the 2023 level. The current-account balance has similarly strengthened, supporting the positive outlook for the external sector.
Structural Reforms and Future Outlook
Over the past two years, the Central Bank has cleared the FX backlog while deploying the Nigerian Foreign Exchange Code and Bloomberg's BMatch platform to enhance market efficiency. The gap between official and parallel markets has narrowed to under two per cent, effectively squeezing out arbitrage opportunities that previously fueled market manipulation.
To consolidate these gains, Cardoso confirmed the bank's commitment to a revised FX manual aimed at widening market participation and tightening documentation standards. This reinforcement of a system relying on transparent price discovery rather than administrative fiat is expected to reduce market rigidity, enhance efficiency, and increase liquidity – all contributing to greater market stability.
Economic momentum continues to build alongside financial market stability. Output grew by 4.23 per cent in Q2 of 2025, representing the strongest growth in four years. Improving Purchasing Managers' Index readings, with November's figure at 56.4 points, indicate renewed business confidence. Non-oil exports have grown more than 18 per cent year-on-year, reflecting the benefits of exchange-rate flexibility.
While oil remains significant, accounting for 33 per cent of government revenue and 51 per cent of exports, its dominance has diminished from historical levels approaching 80 per cent.
International recognition of Nigeria's progress is evident in recent rating upgrades. Fitch upgraded Nigeria to B (stable), Moody's elevated the rating to B3, and S&P revised its outlook to positive. The country's historic $2.35 billion Eurobond issuance attracted an unprecedented $13 billion in orders, signaling remarkable market confidence in a nation that faced financial challenges just years earlier.
The banking recapitalization drive is advancing steadily, with 16 operators having already achieved the new capital threshold ahead of the March 2026 deadline. Sector stress tests indicate resilience, though concentration and cyber risks remain areas requiring attention.
Despite maintaining the MPR at 27 per cent, the MPC's adjustment of the asymmetry corridor to +50/-450 basis points has effectively lowered the transaction band to 22.5 per cent to 27.5 per cent from the previous 24.5 per cent to 27.5 per cent. This modification is expected to unlock additional liquidity for private sector lending and economic growth.
The MPC acknowledged ongoing challenges, including still-elevated inflation, global economic headwinds, geopolitical strains, and domestic security issues. Some obstacles require bold fiscal policy solutions to drive stronger, inclusive growth across sectors.
Nevertheless, Cardoso asserted that Nigeria is more resilient to external shocks today than at any point in recent memory, supported by multi-year-high reserves and a diversified revenue base that has reduced historical concentration risks associated with commodity trading. The speed of Nigeria's economic progress in 2026 will largely depend on how effectively the country implements proactive fiscal policies.
