Market News

From Juliana Taiwo-Obalonye and Isaac Anumihe, Abuja

Nigeria’s Central Bank Governor, Olayemi Cardoso, has warned that excess liquidity and the 2027 election cycle threaten the economy’s recent stability gains, urging careful oversight to protect reforms.

Speaking at the National Economic Council (NEC) Conference 2026 themed “Delivering Inclusive Growth and Sustainable National Development: The Renewed Hope National Development Plan” at the Presidential Villa, Cardoso gave remarks before the “Fiscal and Monetary Outlook 2026-2030: Priorities and Imperatives” panel.

He recalled the inherited crisis: “The cost of loose monetary policy accessibility, the cost of having to soak up all that liquidity was a problem. Next slide and persistent inflation. Inflation has served to 34.6% dysfunctional FX market. You all remember, there’s a huge backlog of over $7 billion and that the parallel market premium exceeded 16% loss of investor confidence. We all know that was a case. Everybody took flights, nobody went to hold Naira, and it was a very desperate situation. Then, of course, there were direct intervention by the Central Bank, which reached an unprecedented level of 10.93 trillion Naira, which honestly was a huge problem.” These interventions “provided short term support, which many people would argue, but created long term mandatory distortions, excess liquidity and increased cost of liquidity management.”

The response featured three pillars. First: “a decisive monetary policy on V set NPR increased by a very aggressive 875, basis points to decisively tackle inflation. And of course, we move back to what we call orthodox monetary policy, we phase out all quasi fiscal development finance interventions to focus squarely on price stability, because without that, you have no growth, you have no investment, you have no growth.” Second: “engineering a market driven ethics regime, which we’ve been talking about for a long time, unification and price discovery, clearing the FX backlog and institutionalized transparency, which, to my mind, is a very, very key ingredient of MGM in marketing FX regime.” Third: “fiscal coordination and systemic resilience… enhanced fiscal coordination, adhering to the fact that they are statutory limits of deficit financing, good ways and means advances to the government, and we had to have a sharp decline in that which was on that slide, 2.65% in 2023 to 0.69% in 2024.”

Results include “sustained GDP growth of 3.98% strong. Current accounts very out of sequence. For a very long time we haven’t had that $3.42 billion surplus recorded in third quarter of 2020, by a significant improvement, significant maturation, inflation, 15.15% banking sector soundness, growing external reserves of 49 billion as of February, 05, 2026.”

Cardoso added: “When we took over, the net results figure was about 3 billion US, and at the end of this last year, the net results figure had gone up quantum me to the it was in the 30s and then the and as I said, February 2026. Is $49 billion. We are now lead buyers by that… the premium between the official and partner market risk has collapsed to under 2% when people travel. Now when they travel, you don’t have to look for foreign exchange. You use your Naira card and pay for whatever you want. Now, you have a situation where a Naira is more competitive, and people are not afraid to go neither. In those days when you go all the way down in the West African sub region and you give them Naira, nobody wants to touch it, that has all gone. Now there’s predictability. You can plan.”

He said the 2026-2030 roadmap prioritises “anchoring, disinflation, FX, market normalization and financial system resilience. And what this means in common language, is that we will stay the course and continue doing the things we have done… price stability through transition to inflation targeting. Number two, strengthen external reserve, safeguarding the value of the naira… banking sector recapitalization. Ongoing recapitulation will support the financing of the $1 trillion economy.”

Key risks demand focus, especially elections: “Danger ahead, the risk we must manage. And I put this in a very important slide, liquidity overhang. There’s a lot of liquidity that still remains within the system. And manage this very, very carefully, so we are not out of the woods yet. The election cycle, typically election cycle, a lot of money gets pumped into the system. This has to be watched to ensure that it does not destabilize and challenge the very, very bold reforms which have brought about stability to the economy, the global trade tensions.”

Monetary policy has limits: “I will say here that monetary policy is a necessary but insufficient tool. It can, it can take us to where we have gotten to now, but it has. It is no substitute for the fundamentals. No central bank can sustainably deliver low and stable inflation alone, where structural drivers such as food supply shocks, high energy and logistics costs and infrastructure services are large contributors to high pressures. Liquidity management has boundaries. Transmission is imperfect when markets are thin and informality is high. That is why sustained gains require fiscal discipline, supply side reforms and institutional coordination. Monetary stability requires fiscal discipline, fiscal sustainability and requires monetary femininity. Policy coherence is a stability angle.”

Cardoso added that the sub-nationals play a key role, controlling “over 50% of fact. Revenue can determine macroeconomic outcomes… Sub-national governments can significantly impact micro economic stability.” By 2030, targets include “single digit inflation, growing foreign exchange reserves higher powered by non foreign exports, FDI and remittances… Globally competitive financial system, stable markets with effective exchange rate, deeper local currency financing, financial inclusive economy.”

Cardoso concluded: “The future is looking bright. Despite challenges. We are committed to the reform agenda, but I would caution to add that we are not out of the woods. We need to continue to remain focused. We need to continue doing the things we are doing to ensure that all the potential headwinds and risks are properly seen in advance and managed at the beginning. From the central bank, I want to assure you that we will remain focused on strategic sequencing, improving fiscal, monetary policy coordination, and strengthening the economic environment to unlock Nigeria’s potential.”