The Governor of the Central Bank of Nigeria (CBN), Olayemi Cardoso, has attributed the nation’s current economic challenges to poor economic management between 2015 and 2023. Speaking at a press briefing in Abuja, Cardoso stated that the present administration inherited a “highly distorted economy,” with significant inflation and liquidity issues resulting from excessive monetary expansion.
Cardoso, who referenced the two-term tenure of former President Muhammadu Buhari, highlighted that the current administration faced a “very loose money supply situation.” He pointed out that money supply had surged from N19 trillion in 2015 to N54 trillion by 2023, largely due to excessive use of the Ways and Means provision—a method by which the government borrows directly from the central bank to cover fiscal deficits.
Impact of Excessive Liquidity on Inflation
Cardoso explained that the N35 trillion printed through Ways and Means resulted in an enormous amount of money in circulation, which contributed significantly to inflationary pressures. “Too much money was chasing the same amount of goods,” he said, underscoring the key driver of the current economic hardship.
“The past eight years witnessed an incredible amount of liquidity injection into the system, and that has resulted in inflation, which is having a severe impact on citizens’ daily lives,” the CBN governor added.
Cardoso also pointed out that while the economy grew at an average rate of 1.2% during that period, money supply was growing at 12.6%, exacerbating inflation and economic instability. He cited fluctuations in oil prices and exchange rates as additional factors that worsened the economic situation.
New Monetary Policies Introduced
At the Monetary Policy Committee (MPC) meeting in September, the CBN announced several key decisions aimed at stabilizing the economy. The committee unanimously voted to raise the benchmark Monetary Policy Rate (MPR) by 50 basis points, bringing it to 27.25%. This move is expected to further increase borrowing costs for businesses, particularly in the manufacturing and real sectors of the economy.
The MPC also raised the Cash Reserve Ratio (CRR) for Deposit Money Banks (DMBs) from 45% to 50%, and for Merchant Banks from 14% to 16%, while maintaining the Liquidity Ratio at 30%. Cardoso explained that these measures are necessary to control excess liquidity and stabilize the foreign exchange market.
“The numbers clearly show we are heading in the right direction,” Cardoso remarked, noting that the recent tightening of monetary policy is gradually restoring investor confidence. He also emphasized the importance of collaborating with fiscal authorities to manage energy prices and address other structural issues affecting inflation.
Impact on the Private Sector
However, the CBN’s recent policies have raised concerns among private-sector stakeholders, who fear that the increased interest rates and tightened monetary conditions could stifle investment and hinder economic growth. Dr. Muda Yusuf, Director/CEO of the Centre for the Promotion of Private Enterprise (CPPE), criticized the MPC’s decision, arguing that it would place undue strain on manufacturers, entrepreneurs, and investors.
“At a time when businesses are struggling, the CBN has chosen to tighten the noose on them,” Yusuf said. He warned that the high interest rates—now set at 27.25%—combined with the CRR increase, could push borrowing costs above 35%, making it difficult for businesses to operate and invest.
Yusuf also pointed out that the Nigerian economy is still in a fragile state, as reflected in the second-quarter GDP figures, which showed slowdowns in key sectors like manufacturing, trade, ICT, and real estate. “The tightening of financial conditions under these circumstances does not seem appropriate,” he added.
Calls for Alternative Solutions
The Nigerian Association of Chambers of Commerce, Industry, Mines, and Agriculture (NACCIMA) also voiced concerns, with its president, Dele Kelvin Oye, urging the CBN to explore alternative strategies. Oye called for targeted support for specific sectors, deficit reduction measures, and increased local production to stimulate growth and reduce inflationary pressures.
“The decision burdens businesses with higher loan costs, exacerbating their struggles without necessarily addressing inflation or stabilizing the naira,” Oye said. He stressed the need for a collaborative approach between the CBN and stakeholders to find innovative solutions to the country’s economic challenges.
Outlook and Future Expectations
Despite the pushback from the private sector, Cardoso maintained that the tough decisions were necessary to rein in excess liquidity and high inflation, which he said had been fueled by past fiscal and monetary policies. He acknowledged the difficulties faced by businesses but emphasized that the CBN had no choice but to take strong actions to restore economic stability.
Looking ahead, the MPC expressed optimism that ongoing government initiatives—such as the removal of fuel subsidies and the lifting of refined petroleum from the Dangote refinery—will help moderate inflationary pressures in the medium term. The committee also praised the federal government’s duty-free import window for food commodities, which is expected to ease food supply deficits and reduce prices.
While these measures are expected to have positive effects in the long run, the immediate impact of the CBN’s monetary tightening is likely to result in higher borrowing costs and financial constraints for businesses. Investors and economic analysts will be watching closely to see if the policies can effectively address inflation while avoiding a deeper economic downturn.
In the meantime, the CBN and the federal government must work closely to ensure that fiscal and monetary policies are aligned, with a focus on achieving long-term price stability, attracting investments, and fostering sustainable economic growth.
