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Three years ago, on September 15, 2023, when Olayemi Cardoso was nominated by President Bola Ahmed Tinubu to serve as Governor of the Central Bank of Nigeria (CBN) and assumed office later that month, he inherited an economy grappling with high inflation, severe foreign exchange distortions and a wide gap between the official and parallel-market exchange rates.

Three years on, his tenure has been defined by a strict focus on monetary-policy orthodoxy, far-reaching foreign exchange reforms and an effort to restore confidence in the apex bank and the economy.

The clearest evidence of the change is now emerging in Nigeria’s external position, foreign exchange market and banking sector.

Nigeria’s external reserves have climbed above $54 billion, their strongest level in more than 18 years, while the naira has strengthened significantly in the official market. CBN data showed the currency trading around N1,326 per dollar on Monday, September 14, 2026, a sharp improvement from the levels reached during the height of the FX crisis.

The improvement has not happened in isolation. It followed a series of difficult policy decisions that initially placed significant pressure on the naira and businesses, but were designed to remove distortions that had accumulated in the FX market.

From multiple FX rates to a market-driven system

One of Cardoso’s most consequential decisions came early in his tenure when the CBN moved to unify the foreign exchange market and allow market forces to play a greater role in determining the value of the naira.

The Bank abolished the segmentation of the FX market and moved transactions into a more unified framework based on willing-buyer, willing-seller principles, subsequently operating through what is now the Nigerian Foreign Exchange Market (NFEM).

The immediate consequence was a sharp depreciation of the naira to as low as N1,750 per dollar in the official foreign exchange market and N1,900 in the parallel market.

For businesses and households, the adjustment was painful. Imported goods became more expensive, production costs rose and inflationary pressures intensified.

But the CBN argued that allowing the official exchange rate to reflect market conditions was necessary to eliminate arbitrage, improve transparency and attract foreign capital.

The Bank also moved to clear verified outstanding FX obligations estimated at about $7 billion, a step it said was necessary to restore credibility to the market and rebuild confidence among foreign investors and businesses.

The International Monetary Fund has subsequently acknowledged that Nigeria’s exchange-rate liberalisation, alongside tighter monetary and fiscal policies, has helped improve FX-market functioning, rebuild external buffers and strengthen macroeconomic stability.

The turnaround in external reserves

Perhaps the most visible sign of the changing FX environment is the rise in Nigeria’s external reserves.

The CBN said reserves rose from $33.6 billion in October 2023 to $37.9 billion by July 2024 following the FX reforms and clearance of the verified backlog.

The build-up has continued.

The reserves reached $46 billion at the end of 2025, according to the IMF, up from $40 billion at the end of 2024. By September 2026, CBN data showed gross reserves had risen above $54 billion.

Recent CBN data put reserves at about $54.08 billion in early September, while another update cited $54.41 billion, placing Nigeria at its strongest reserve position in 18 years and close to its historical highs.

That matters because reserves provide a buffer against external shocks and strengthen the country’s capacity to meet international obligations. More importantly for the FX market, stronger reserves give investors and businesses greater confidence that the country has sufficient external liquidity to support orderly market conditions.

The CBN’s 2026 reserve target was $51.04 billion. The current level is therefore already above that projection.

What explains the reserve build-up?

The increase in reserves cannot be attributed to one CBN intervention alone.

Nigeria’s external position has benefited from stronger oil-related receipts, improved foreign exchange inflows, portfolio investment, remittances and other capital inflows.

The IMF noted that Nigeria recorded a current-account surplus of 4.8 percent of GDP in 2025, while gross reserves increased to $46 billion. It also identified non-resident purchases of CBN open-market operations and a $2.3 billion Eurobond issuance among factors supporting reserve accumulation.

The CBN has also argued that improved confidence in the FX market has helped attract foreign capital.

Cardoso previously said capital and investment inflows rose significantly between 2023 and 2025, while the premium between the official and parallel markets fell sharply from the extreme levels seen before the reforms.

The broader objective of the FX reforms was to create a market in which dollars could be priced more transparently, investors could enter and exit with greater confidence, and the CBN would no longer have to sustain an artificial exchange rate at the expense of scarce reserves.

The naira: From sharp depreciation to renewed strength

The naira’s journey under Cardoso has been one of the most dramatic aspects of the reform programme.

After the exchange-rate reforms triggered a significant depreciation, the currency spent much of the following period under pressure.

But the direction has gradually changed.

Improved dollar liquidity, stronger reserves, increased inflows and greater confidence in the FX market have helped the naira recover.

By September 2026, the currency had returned to the N1,300 range in the official market. It was quoted around N1,326 per dollar on Monday, underscoring the extent of the reversal from the severe depreciation that followed the initial reforms.

The improvement is particularly significant because the CBN’s objective has shifted from defending a particular exchange-rate level to improving the functioning of the market.

In that sense, the recent strength of the naira is being presented as evidence that the market reforms are beginning to work through improved liquidity and stronger external buffers.

Moving the CBN back to its core mandate

The FX reforms have been accompanied by a broader attempt to change how the CBN operates.

At the beginning of his tenure, Cardoso outlined a 10-point reform agenda centred on compliance with the CBN Act, monetary and price stability, stronger corporate governance, exiting quasi-fiscal activities, improving payments infrastructure and strengthening Nigeria’s external reserves.

One of the most important elements was the decision to move the CBN away from quasi-fiscal activities.

The Bank has sought to restore the distinction between monetary policy and fiscal policy, including an exit from the practice of using the CBN as a major source of government financing.

The Nigerian Economic Society recently cited the cessation of Ways and Means financing, FX-market reforms, clearance of outstanding FX obligations, banking recapitalisation and payment-system reforms among the major achievements of the Cardoso-led CBN.

This represents a fundamental shift in the philosophy of the apex bank.

Rather than using the Central Bank’s balance sheet to address every economic problem, the reform agenda seeks to return the CBN to its traditional functions of maintaining monetary and financial stability.

Inflation remains the unfinished part of the story

The strongest test of the reforms, however, is not the reserve number alone.

It is whether macroeconomic stability eventually translates into lower inflation, cheaper financing, stronger investment and improved living standards.

There has been significant progress on disinflation.

The IMF said inflation had been on a declining trend for more than a year through February 2026, reaching 15.1 percent year-on-year, although it subsequently rose to 15.4 percent in March, 15.93 percent in May, before declining to 15.43 percent in July 2026.

The Fund has welcomed the authorities’ reforms and said strong reforms over the past three years have improved Nigeria’s macroeconomic outcomes and built resilience.

But it has also stressed that conditions remain difficult for many Nigerians, with poverty and food insecurity continuing to pose serious challenges.

This is where the assessment of Cardoso’s three years becomes more complicated.

The CBN can point to stronger reserves, improved FX-market functioning, greater monetary-policy discipline and a more resilient banking system.

But businesses and households ultimately judge monetary reforms by what they mean for the cost of food, transportation, credit, imported inputs and everyday living.

Banks are being rebuilt for the next phase

Another major pillar of Cardoso’s reform agenda has been the recapitalisation of the banking sector.

In March 2024, the CBN raised minimum capital requirements to N500 billion for banks with international authorisation, N200 billion for national banks and N50 billion for regional banks.

The objective was to strengthen banks’ balance sheets and prepare them to support a larger economy while improving their ability to withstand shocks. By the end of March 31, 2026, 33 banks successfully completed the recapitalisation exercise.

The IMF welcomed the recapitalisation, describing Nigeria’s financial system as resilient while urging continued vigilance over non-performing loans and the relationship between banks and the sovereign.

The recapitalisation therefore fits into the same broader philosophy as the FX reforms: strengthen the financial system first so that it can support sustainable economic growth rather than relying on short-term interventions.

What has changed after three years?

The most important change under Cardoso is not simply that the naira is now around N1,326 per dollar or that reserves have crossed $54 billion.

It is that the CBN has attempted to change the mechanisms through which Nigeria manages its monetary and foreign exchange system.

The old model relied heavily on multiple FX windows, administrative controls, interventions and central-bank financing.

The new model places greater emphasis on market-based exchange-rate determination, tighter monetary policy, stronger reserves, improved banking capital and institutional discipline.

The transition has been costly.

The initial naira depreciation worsened inflation and placed significant pressure on households and businesses. Interest rates were raised sharply to contain inflation and stabilise expectations, increasing the cost of borrowing.

But the IMF’s assessment suggests that the reforms have produced stronger macroeconomic resilience, while the latest reserve and FX-market data provide some of the clearest evidence yet that external conditions have improved.

The question now is what comes next

Tilewa Adebajo, chief executive officer of CFG Advisory, said the key missing element in Nigeria’s economic reform agenda is inflation targeting, noting that the recent rebasing of the economy has distorted some measures of the level of inflation.

“The only miss I see is inflation targeting. I think that is very important because the rebasing has distorted many things concerning the level of inflation,” Adebajo said.

He also identified policy coordination among monetary, fiscal, trade, industrial and investment policies as another critical issue that needs to be addressed.

According to him, the Central Bank of Nigeria is not directly responsible for coordinating these policies, stressing that the coordination must come from the Presidency to provide the right direction for the economy.

“I think we can begin to see that we also need to look at the bigger picture because the reforms by themselves are not sufficient. We need to consolidate the gains of these reforms,” he said.

Adebajo said Nigeria should draw lessons from periods when the economy performed strongly, noting that inflation was then around 9.5 percent, interest rates were about 11.5 percent, while economic growth ranged between 8 and 10 percent.

“If we look at the Nigerian economy during a period when it was performing well, inflation was at about a single-digit rate of 9.5 percent. Interest rates were about 11.5 percent, and the economy was growing at between 8 and 10 percent,” he said on a CNBC programme.