…FX reserves leap 26% on surging inflows
…Rates of interest rise six instances in response to galloping inflation
Olayemi Cardoso is celebrating his two years in workplace in the present day as governor of the Central Financial institution of Nigeria (CBN). Up to now, he has shored up international reserves, eased international change (FX) strain, and steadied the naira. Nevertheless, critics warn that his aggressive financial tightening is crowding out non-public funding and stifling credit score.
Cardoso assumed workplace in an performing capability on September 22, 2023. Since then, exterior reserves have grown by $8.76 billion, rising from $33.23 billion to $41.99 billion as of September 18, 2025.
Cardoso didn’t simply obtain this with out implementing vital reforms. He cleared the FX backlog left by his embattled predecessor, liberalised the market and enhanced transparency, boosting investor confidence.
“In 2024, exterior reserves appreciated as a result of key reforms by the CBN akin to clearing of the FX backlog, elevating rates of interest, and tightening FX coverage,” analysts at FSDH Service provider Financial institution defined.
In keeping with the CBN, FX reserves are belongings held in foreign currency by a financial authority to again liabilities and affect financial coverage. These reserves embrace: international banknotes, deposits, bonds, treasury payments, and different international authorities securities. They serve a number of functions however are primarily held to make sure that a authorities or its company has backup funds in case of a speedy devaluation of the nationwide foreign money. Overseas change reserves are additionally known as worldwide or exterior reserves.
Steep naira fall tempered by stability
The naira has maintained relative stability towards the greenback after depreciating by 47 % throughout the two-year interval. The native foreign money, which traded at N789 on September 3, 2023, weakened by N708 to shut at N1,497 on September 19, 2025, on the Nigerian Overseas Trade Market (NFEM), based on the CBN knowledge.
On the parallel market, popularly often known as the black market, the naira depreciated to N1,525 as of September 19, 2025, representing a 35.08 % decline in contrast with N990 quoted on September 22, 2023.
Regardless of the steep depreciation of the naira, the Cardoso-led CBN has achieved foreign money stability, reviving investor curiosity in Nigeria’s belongings.
“Although the naira has depreciated underneath Cardoso, elevating the price of residing in Nigeria, it has been offset by the soundness and predictability which have attracted buyers,” mentioned Ike Ibeabuchi, an rising markets analyst.
Trade charge unification
In November 2024, Cardoso highlighted the CBN’s efforts to unify Nigeria’s a number of change charges, with a view to eliminating market distortions and restoring transparency, whereas making a extra predictable setting for companies.
“Over the previous yr, we’ve undertaken important reforms to unify Nigeria’s change charge, eliminating distortions and restoring transparency. This unification has enabled us to clear excellent FX obligations, giving companies, starting from producers to airways, the arrogance to plan and make investments sooner or later,” he defined.
To additional improve effectivity within the FX market, the CBN launched an digital FX matching system, a platform that had already confirmed efficient in different markets.
The affect of those reforms has been mirrored in key indicators. In keeping with Cardoso, the typical day by day turnover within the Nigerian Autonomous Overseas Trade Market elevated by 226 % within the first half (H1) of 2024, in contrast with the identical interval in 2023. Overseas portfolio inflows surged by over 72 % throughout the identical interval, whereas reserves climbed to $40 billion from $32 billion in Could 2023, reaching their highest stage in almost three years.
The market additionally facilitated over $9 billion in capital outflows up to now yr, permitting buyers to repatriate capital and dividends with out delays. Moreover, Nigeria recorded a $6 billion present account surplus in H1 of 2024, pushed by elevated home refining capability, a shift towards non-oil exports, and better remittance inflows.
Ayodeji Ebo, managing director/CBO at Optimus by Afrinvest, mentioned the CBN governor has, inside two years, helped to revive the respect and integrity of the apex financial institution by improved accountability and transparency.
In keeping with him, notable achievements embrace: the well timed launch of audited accounts, enhanced FX liquidity and stability, and the publication of extra frequent experiences that present helpful insights on the financial system.
Given Nigeria’s import-dependent construction, the relative appreciation and stability of the naira are optimistic developments that help enterprise planning and investor confidence.
Learn additionally: Yemi Cardoso: Two years after…
FX inflows
Overseas portfolio buyers (FPIs) have remained the dominant supply of liquidity within the FX market within the final two years, accounting for about 86 % of FX provide from international sources and roughly 32 % of complete FX inflows. Inside the FPI class, capital inflows into fixed-income devices had been the most important contributors at $951 million, representing about 87 % of complete FPI inflows, whereas equity-related inflows made up $139 million.
In distinction, inflows from international direct investments (FDIs) have remained subdued, falling to $22 million from $49 million. From home sources, inflows from non-bank corporates, which have accounted for about 25 % of complete FX provide, declined by 28 % month-on-month to $826 million in August 2025, in contrast with $1.2 billion in July.
Amid the decline in provide from main sources, the CBN elevated its interventions to help liquidity within the FX market. In August 2025, the financial institution bought $574 million, up from $326 million within the earlier month.
Inflation
Inflation declined from 26.72 % in September 2023 to twenty.12 % in August 2025 underneath Cardoso. Nevertheless, this can be attributed to the rebasing of the Shopper Value Index (CPI), which led to the decline in headline inflation.
Nevertheless, the efforts of the Cardoso-led CBN can’t be too careworn. In response to elevated inflation, which hit a 22-year excessive of 27.33 % year-on-year in October 2023, the CBN applied varied measures, together with periodic Open Market Operations (OMO) to mop up liquidity. The financial institution additionally issued higher-yield treasury payments, eliminated the cap on the remunerable Standing Deposit Facility (SDF) window, and launched common debits on the Money Reserve Requirement (CRR). These efforts contributed to Nigeria’s headline inflation decelerating to twenty.12 %, down from 21.88 % in July 2025, based on knowledge from the Nationwide Bureau of Statistics (NBS).
By 2025, the CBN adopted a extra measured financial coverage stance, holding charges regular all through the primary half of the yr. This shift marked a transition to a extra orthodox and predictable strategy after a cumulative 875 foundation factors hike within the Financial Coverage Price (MPR) in 2024, aimed toward taming inflation, stabilising the naira, and enhancing investor confidence.
Rate of interest hikes
The Cardoso-led CBN has raised rates of interest six instances to tame the rising inflation.
The rate of interest has risen to 27.25 % underneath Cardoso, from 18.75 % when he assumed workplace.
The excessive rate of interest has attracted portfolio investments into Nigeria, but in addition stifled credit score.
“One key space for enchancment—although admittedly a ‘hen and egg’ scenario—is the necessity for decrease rates of interest. Lowering the price of finance would encourage enterprise enlargement and ease the monetary burden on corporations,” Eboh, earlier quoted, mentioned.
Muda Yusuf, CEO of the Heart for the Promotion of Personal Enterprise, mentioned elevated lending charges have suppressed non-public sector borrowing, notably in manufacturing, agriculture, small companies, actual property, amongst others.
“There’s a rising danger that personal funding could possibly be displaced by high-yield authorities devices,” he mentioned.
“Small and medium enterprises face restricted entry to reasonably priced credit score.”
Banking sector capitalisation
The Cardoso-led CBN additionally introduced financial institution recapitalisation to strengthen monetary establishments. Banks had collectively raised over N13 trillion in contemporary fairness capital as of mid-2025, considerably strengthening their capital buffers and enhancing resilience to credit score danger, based on a brand new report by Proshare. Entry Holdings Plc, Wema Financial institution, Zenith Financial institution, Lotus Financial institution, Jaiz Financial institution, Providus Financial institution, Stanbic IBTC, and Greenwich Service provider Financial institution have all met the necessities.
“Calibrate money reserve ratio (CRR) and the financial coverage charge (MPR) downward as inflation moderates to create a extra enabling credit score setting. Complement financial tightening with supply-side measures to deal with structural inflation drivers,” Yusuf really helpful.
He additional urged Cardoso to advertise growth finance devices and deepen the home bond market to mobilise assets for infrastructure.
