By GEB
The performance of the Central Bank of Nigeria (CBN) in the management of monetary policy in recent times deserves some measure of commendation. This is in respect of the gains in reducing the inflation rate, the recapitalisation programme of the deposit money banks, and the structuring of policy to enhance lending to the private sector in the quest to grow the economy.
These are issues that have proven to be knotty to the apex monetary authority over the years, but appear to be smooth sailing for the current CBN, though with some caveats in the attainment of these desirable goals.
First, there have been concerns in some quarters about the reliability of the economic figures being produced by the banks themselves as well as by the National Bureau of Statistics. The rate at which the inflation rate is reported to have declined has become suspect in some circles, with some schools of thought inferring that it is not a case of working towards the answer in the attainment of the Tinubu administration’s target of a 15% rate of inflation as enunciated in the 2025 federal budget.
This rapid decline in the inflation rate is reported to have taken place when the spate of insecurity in the country increased and access to the farms by many farming communities in the Middle Belt of the country became very difficult, with the rampaging of bandits and fear of kidnapping at a very high level across the country. This has been coupled with the poor state of infrastructure, which has not been favourable to the industrial sector.
Despite this, the Purchasing Managers’ Index (PMI) was reported to have surged to 56.4 points in November, which is reported as being the highest in five years, a clear indication of an increasingly positive outlook for the third and fourth quarters of 2025. Nonetheless, the hiking of the monetary policy rate over the past periods appears to have helped to mitigate the hitherto growing trend in the rate of inflation, thus suggesting that the inflation in the country is a monetary phenomenon, though many feel that it is actually structural and more of a cost-push in nature.
The reported latest food inflation figure of 13.12% for October 2025 from the 39.16% recorded in the same period of 2024 has been encouraging, though.
The other policy stance of the apex bank has been the recapitalisation programme of the deposit money banks, which is making substantial progress. The CBN report on this, which indicates that 16 banks have already met the recapitalisation targets with 27 others recorded to have raised additional capital, is quite encouraging.
This is in consonance with the Tinubu administration’s target of meeting its target of a trillion-dollar economy by 2030. The availability of needed capital with the banks is definitely a sine qua non for the increase of lending to the private sector in the expansion of economic activities.
However, the lessons of the Soludo-era capitalisation exercise should be learnt such that adequate corporate governance measures would be put in place to avoid the abuses that took place in the sector during that period that led to significant loss of shareholder funds by investors and the consequent intervention by the Sanusi Lamido CBN in addressing the negative consequences of poor corporate governance under the previous management of the apex bank. It is hoped that the Cardoso-led CBN is taking cognisance of these historical lessons to avoid a repeat of events of the past.
It can be obvious that the persistent focus on the reduction of inflation in the past two years by the CBN has placed less emphasis on easing credit to enhance economic growth. Good enough, the Monetary Policy Committee (MPC) meeting of November, which maintained the monetary policy rate at 27% clearly indicates that the enhancement of economic growth has been brought to the front burner by the apex bank.
Despite the past though, growth of GDP increased from 3.13% in the first quarter of 2025 to 4.23% in the second quarter, with a lot of the growth coming from the non-oil sector, implying that more growth should be expected with the easing of credit as enunciated in the communique of the last MPC meeting.
The CBN has its work cut out for it. Its frequent intervention in the foreign exchange market, coupled with the harmonisation of rates in the market, appears to have done the magic, though the supply of foreign exchange is still inadequate to sustain the stability of the market that would warrant less intervention in the market. This frequent instability in the market is a challenge that the bank faces, which thus compels it to frequently intervene to force some form of convergence in the market.
While the CBN can be commended on many counts in its management of monetary policy, it has to consider all the identified grey areas in the management of its policies in ensuring that the reported macroeconomic stability in the country is sustained.
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