Olayemi Cardoso: Long Road from Monetary Crisis to Stability

Three years into his tenure as Governor of the Central Bank of Nigeria, Olayemi Cardoso’s imprint on monetary policy is increasingly defined not by any single interest-rate decision, but by a broader effort to restore confidence, stabilise the naira and reimpose discipline, writes James Emejo

After assuming leadership of the apex bank, the most consequential feature of his tenure may not be any single interest-rate decision, foreign-exchange intervention or regulatory circular, but the attempt to rebuild the operating architecture of the country’s monetary and financial system.

Cardoso assumed office on September 22, 2023, amid severe macroeconomic dislocation. Foreign-exchange liquidity had become scarce, the naira market was fragmented, inflation was accelerating and confidence in the conduct of monetary policy had weakened. The CBN was also carrying a sizeable stock of inherited foreign-exchange obligations, while years of unconventional monetary and quasi-fiscal interventions had blurred the boundary between monetary management and fiscal financing.

Three years later, the landscape is materially different.

External reserves have risen above $55 billion; the banking industry has completed a major recapitalisation exercise; the foreign-exchange market operates within a more unified framework; formal remittance inflows have expanded; payments infrastructure is being rebuilt around security and interoperability; and the CBN has introduced a new generation of rules covering everything from cybersecurity and anti-money laundering to agent banking and financial-market benchmarks.

The changes amount to something broader than a collection of policy measures. They represent an effort to return the central bank to a more conventional role: preserving monetary and financial stability, improving market functioning and allowing prices—including the price of money and foreign exchange—to increasingly emerge from transparent market mechanisms.

Inherited crisis

Cardoso has repeatedly stressed that the starting point matters. Three years into the job, he was unusually direct in describing the environment he inherited: confidence had been lost not only in the CBN but in the currency itself.

The naira, he recalled, was depreciating so rapidly that households and businesses could scarcely plan. Prices changed between visits to suppliers. Nigerians sought foreign currency as a store of value, while businesses struggled to determine what their costs would be from one day to the next. The foreign-exchange crisis was only one part of the problem.

Cardoso pointed specifically to the burden of Ways and Means financing. He said the CBN inherited about ₦23.7 trillion in Ways and Means advances, alongside more than ₦10 trillion in interventions. In his assessment, the combination had injected enormous liquidity into an economy whose productive capacity had not expanded correspondingly.

The consequence was a monetary system in which the central bank’s ability to influence inflation and financial conditions had been severely weakened.

The CBN’s reform agenda therefore began with a deceptively simple proposition: take the institution back to its core mandate.

That meant monetary and price stability, financial-system stability and a more disciplined relationship between monetary policy and fiscal operations.

The CBN itself had identified compliance with its statutory mandate, stronger corporate governance, withdrawal from quasi-fiscal activities and improved management of foreign-exchange liquidity as central pillars of the new direction. For Cardoso, that institutional reset remains one of his proudest achievements.

From intervention to orthodoxy

At the heart of the strategy was a return to what Cardoso described as monetary-policy orthodoxy.

The CBN tightened monetary conditions aggressively when inflationary pressures demanded it, moved away from quasi-fiscal interventions and sought to make the Monetary Policy Committee more firmly data-driven. Cardoso also credits the composition of the MPC with helping to navigate the crisis. He pointed to members drawn from academia, research, international consulting and banking, arguing that the diversity of experience provided different perspectives at a moment when conventional policy choices were under enormous pressure. That was particularly important because the CBN’s policy direction initially ran against the global tide.

While several major central banks were moving towards monetary easing, Nigeria tightened aggressively to confront domestic inflation and currency pressures. Cardoso’s argument was that Nigeria could not simply import the policy cycle of other economies.

Its circumstances were different; therefore its policy response had to be different. That philosophy ultimately became one of the distinguishing features of his tenure: policy decisions were to be justified by Nigeria’s own data and conditions rather than by international fashion.

The FX battlefield

The foreign-exchange market became the clearest test of that philosophy. Cardoso inherited a system of multiple exchange rates in which access to different windows could determine the price at which dollars were obtained.

He has since argued that the apparent advantages of some of the old official rates were misleading because access was highly uneven. The reform therefore sought to close the gap between official and parallel markets and establish a more transparent, market-based system. The CBN’s reforms included the clearance of verified FX obligations estimated at about $7 billion, while its wider framework sought to reduce arbitrage and improve transparency. The Bank says the reforms helped strengthen reserves and reduce volatility.

Cardoso’s own assessment goes further. He argued that the differential between exchange-rate windows amounted to a significant implicit subsidy, estimating the economic loss at about three per cent of GDP—larger, he noted, than the estimated two per cent-plus GDP cost of the fuel subsidy.

Whatever the precise accounting methodology, his central point is clear: maintaining multiple exchange-rate regimes imposed a substantial economic cost.

The subsequent reforms sought to eliminate that distortion.

The direction continued through the new FX Manual launched in May 2026, revised rules for BDC operations and measures designed to bring more foreign-currency transactions into transparent formal channels. The CBN said the Fourth Edition of the FX Manual was intended to strengthen transparency, credibility and market-driven price discovery.

The latest numbers provide perhaps the strongest evidence of the external-sector transformation. By September 18, reserves had risen to $55.25 billion, the highest level in more than 18 years, according to figures disclosed around the 307th MPC meeting.

For Cardoso, the reserve accumulation is not merely a statistic. He attributes it to consistency and discipline, alongside stronger formal foreign-exchange inflows and diaspora remittances.

The reserves rebuild

The reserve story has become one of the most visible markers of the three-year transformation.

At the end of 2023, the CBN was operating against a weak external position and severe FX liquidity constraints. By September 2026, gross reserves had crossed $55 billion.

That represents more than an increase in the stock of dollars.

It provides a larger buffer against external shocks, strengthens confidence in the country’s capacity to meet international obligations and gives the monetary authorities greater room to manage episodes of market stress.

The CBN has also diversified the composition of reserves, including the purchase of locally sourced gold refined to international standards. The Bank said the initiative would help conserve foreign exchange and strengthen the quality of the reserve portfolio.

Formal remittance channels have simultaneously become more important. Cardoso has repeatedly highlighted diaspora remittances as part of the broader effort to strengthen Nigeria’s external buffers.

The significance is therefore structural: the CBN wants foreign currency to enter the system through channels that are identifiable, measurable and capable of contributing to reserve accumulation rather than remaining outside the formal financial system.

Recapitalising the banks

If FX reform repaired the external side of the monetary system, banking recapitalisation addressed its domestic financial infrastructure.

Cardoso described the recapitalisation programme as another of his major milestones.

The CBN launched the exercise in March 2024, raising minimum capital requirements to ₦500 billion for commercial banks with international authorisation, ₦200 billion for national banks and ₦50 billion for regional banks. The exercise was designed to produce banks with the capacity to absorb shocks and finance a larger economy.

The significance became clearer after the naira adjustment. The devaluation increased the naira value of banks’ foreign assets and liabilities while exposing the need for stronger capital buffers. At the same time, the government’s ambition of building a $1 trillion economy created a demand for a financial system capable of financing considerably larger volumes of economic activity.

By March 31, 2026, 33 banks had met the revised requirements, raising approximately ₦4.65 trillion in fresh capital, with the bulk reportedly mobilised domestically.

For Cardoso, the domestic component is particularly significant.

It demonstrates, in his view, that Nigeria possesses substantial internal financial resources that can be mobilised for development when confidence and appropriate structures exist.

The exercise has therefore been about more than preventing bank failures. It is intended to create stronger financial institutions capable of supporting investment, absorbing shocks and financing economic expansion.

Inflation: from emergency tightening to recalibration

Perhaps nowhere is the trajectory of the Cardoso CBN more visible than in monetary policy itself.

The early phase of his tenure was dominated by aggressive tightening.

The objective was to break an inflationary cycle fuelled by excess liquidity, exchange-rate pass-through and supply-side pressures. The MPC maintained a restrictive posture for an extended period, even as pressure mounted for cheaper credit.

That persistence is now producing room for recalibration.

Inflation, which Cardoso recalled was around 30 per cent when he assumed office, had declined to 15.39 per cent in August 2026, according to the latest available CPI figure.

The improvement subsequently enabled the MPC to reset the MPR from 26.5 per cent to 23 per cent at its September 2026 meeting—the largest single reduction in the current cycle.

The significance of the move lies less in the size of the cut than in the fact that the CBN now believes the monetary environment has become sufficiently more stable to adjust the policy framework.

That transition—from emergency tightening to calibrated monetary management—is perhaps the clearest indication that the first phase of Cardoso’s strategy has entered a different stage.

The quiet revolution in payments

The transformation has not been confined to monetary policy. The CBN has increasingly treated the payments system as critical economic infrastructure.

The Nigeria Payments System Vision 2028, launched in June 2026, places interoperability, security, inclusion, innovation and trust at the centre of the next phase of digital financial development.

The regulatory architecture has also become more demanding. Revised agent-banking rules, stronger controls around electronic transactions, enhanced instant-payment requirements and tighter fraud-monitoring mechanisms reflect the risks that accompany the rapid digitisation of financial services.

The CBN’s March 2026 instant-payment rules, for instance, gave customers the option to disable instant transfers for specified periods, while new automated AML, CFT and CPF standards were introduced to strengthen financial surveillance. The objective is increasingly to make digital finance not merely fast, but dependable.

Fraud control to financial resilience

That explains the growing emphasis on cybersecurity, consumer protection and financial-crime controls.

A financial system cannot become genuinely resilient if its digital channels are vulnerable.

The CBN has therefore strengthened its BVN and watch-list framework, introduced automated AML/CFT/CPF standards and deployed cybersecurity assessment mechanisms for regulated institutions.

The logic is straightforward. As more Nigerians transact electronically, financial stability increasingly depends on the integrity of the infrastructure through which money moves.

This represents an important evolution in the CBN’s mandate—from protecting banks and financial institutions primarily against traditional balance-sheet risks to protecting the entire digital financial ecosystem.

Re-engineering financial market

Cardoso’s reforms have also reached the less visible machinery through which monetary policy is transmitted.

The introduction of the Nigerian Overnight Financing Rate, alongside reforms to liquidity management, the discount window and fixed-income-market infrastructure, is intended to improve price discovery and strengthen the transmission of monetary policy.

This matters because the effectiveness of an MPC decision does not end with its announcement.

A change in the policy rate must eventually travel through money markets, banks, securities markets and lending rates before it can affect businesses and households.

If those transmission channels are weak, even a well-calibrated policy decision can have limited real-economy impact.

Cardoso’s broader institutional project therefore seeks to strengthen not only the policy decision itself, but the machinery that carries it into the economy.

Global recognition—and the test ahead

For Cardoso, another source of satisfaction is the external recognition of the reforms.

He points to international institutions that watched Nigeria tighten monetary policy when much of the world was moving in the opposite direction.

His recollection is that the response from international policymakers was ultimately an acknowledgement that individual economies had to respond to their own circumstances.

The CBN has also pointed to Nigeria’s exit from the FATF grey list and improvements in financial-system regulation as evidence of stronger institutional credibility.

These developments matter because credibility in monetary policy is partly a function of whether markets believe the institution will remain consistent when conditions become difficult. But credibility is not the same thing as completion.

The three-year record has produced measurable changes in reserves, exchange-rate management, bank capital, inflation and financial-market infrastructure. Yet those gains still have to be transmitted into the wider economy.

A stronger reserve position does not automatically produce cheap credit. A recapitalised banking sector does not guarantee that manufacturers and small businesses will obtain affordable financing.

A more orderly FX market does not eliminate exchange-rate risk. And a lower inflation rate does not immediately restore the purchasing power lost during the years of high inflation. Those are the harder tests ahead.

Cardoso experiment

Three years into the experiment, the defining feature of the Cardoso CBN is arguably not any single policy, but consistency of direction. His own assessment of the period is revealing.

He identifies the return of the CBN to its core mandate, the unification of the FX market, banking recapitalisation, reserve accumulation and inflation reduction among the achievements of which he is most proud.

Taken together, those achievements reveal a common thread. The attempt has been to replace discretion with rules, fragmented markets with unified structures, monetary expansion with discipline, opacity with transparency and emergency interventions with institutional capacity.

That does not make the economic difficulties disappear.

But it changes the machinery with which they are confronted.

Cardoso inherited a central bank operating amid severe confidence, liquidity and foreign-exchange problems. His first three years have largely been about stabilisation and reconstruction—tightening policy, clearing inherited obligations, repairing the FX market, rebuilding reserves, strengthening banks and restoring the institutional boundaries of monetary policy.

The second phase presents a different challenge.

With reserves at their strongest level in more than 18 years and inflation significantly below its 2023 peak, the question is increasingly what the reconstructed monetary architecture can deliver to the productive economy.

That means stronger investment, deeper financial intermediation, more accessible credit, greater productive capacity and sustained economic expansion.

In that sense, the real assessment of Cardoso’s tenure may not ultimately be whether he stabilised the CBN.

It will be whether the stability he has spent three years constructing becomes durable enough to support a more productive Nigerian economy.

Cardoso has spent much of his tenure rebuilding the tracks. The next chapter is about what the economy can carry on them.