By Jennete Ugo Anya
Olayemi Cardoso, Governor of the Central Bank of Nigeria (CBN), has declared that the period of persistent naira devaluation has effectively ended, attributing the shift to structural reforms implemented in Nigeria’s foreign exchange and monetary policy framework.
Cardoso made the remarks while delivering the keynote address at the Annual Distinguished Alumni Lecture organised by the St. Gregory’s College Old Boys Association in Lagos.
According to the CBN governor, recent monetary reforms have strengthened confidence in the country’s financial system and improved transparency in the foreign exchange market.
Cardoso stated that the reforms have helped restore confidence in the naira and reposition the financial system around a more transparent and accessible foreign exchange regime.
DECISION HIGHLIGHT
Olayemi Cardoso stated that the CBN’s monetary and foreign exchange reforms have ended the cycle of repeated naira devaluation while improving transparency and accessibility in the currency market.
Cardoso said the reforms have “restored pride in our currency and strengthened confidence in our financial system.”
DECISION MEMO
The declaration by the CBN governor reflects a broader effort by monetary authorities to frame the country’s recent foreign exchange reforms as a structural shift rather than a temporary stabilisation measure.
Nigeria’s currency policy has historically been characterised by periodic devaluations triggered by declining foreign reserves, oil price shocks and persistent imbalances in the country’s external accounts.
The most recent round of reforms began in 2023 when the CBN dismantled the country’s multiple exchange rate framework and moved toward a unified foreign exchange market.
That reform was intended to eliminate arbitrage opportunities created by the coexistence of official, parallel and preferential exchange rate windows that had previously distorted currency pricing.
Cardoso argued that the previous system allowed only a limited group of market participants to access foreign exchange at official rates, while most economic actors were forced into parallel markets.
According to Cardoso, the new framework has significantly improved accessibility and transparency within the foreign exchange market.
Cardoso also highlighted the narrowing gap between official and parallel exchange rates as evidence that the reforms are improving market efficiency.
The premium between the two markets has declined from approximately 50 percent in 2022 to less than 2 percent on average in 2025, suggesting stronger alignment between official pricing and market demand.
Another indicator cited by the CBN governor is the increase in capital inflows into the Nigerian economy.
Cardoso disclosed that capital inflows into Nigeria rose by nearly 200 percent between 2023 and 2025, reflecting renewed investor interest following reforms in the foreign exchange market.
External reserves have also strengthened, recently exceeding $50 billion, representing the highest reserve level recorded in more than 13 years.
Despite these improvements, the CBN continues to face a complex monetary policy environment shaped by inflationary pressures and external economic shocks.
Cardoso reiterated that restoring price stability remains the central objective of the CBN’s monetary policy strategy.
According to Cardoso, the bank remains committed to reducing inflation to single-digit levels, although the timeline for achieving that goal will depend on broader economic conditions.
Cardoso noted that inflation functions as an implicit tax on households, particularly affecting lower-income populations.
Cardoso said, “inflation is effectively a tax, and it disproportionately affects the most vulnerable members of society.”
DATA BOX
Foreign exchange premium:
2022: ≈50% gap between official and parallel markets
2025: <2% average gap
Capital inflows growth (2023–2025): ≈200% increase
External reserves level: >$50 billion
Highest reserves level in: over 13 years
Policy target: Single-digit inflation
Key reform measure: Removal of multiple exchange rate system
WHO WINS / WHO LOSES
Investors and foreign portfolio participants benefit from improved transparency and liquidity in the foreign exchange market.
Businesses reliant on foreign currency transactions gain improved access to formal foreign exchange channels.
However, currency stabilisation policies may continue to impose adjustment pressures on sectors exposed to imported inputs or foreign exchange volatility.
POLICY SIGNALS
The Central Bank of Nigeria’s messaging signals an intention to consolidate foreign exchange reforms rather than return to administrative exchange rate controls.
The emphasis on market transparency indicates a policy preference for rules-based currency management rather than discretionary intervention.
The bank’s continued focus on inflation control suggests that monetary tightening may remain central to macroeconomic stabilisation efforts.
INVESTOR SIGNAL
Improved foreign exchange liquidity and rising external reserves could strengthen investor confidence in Nigeria’s macroeconomic framework.
The narrowing spread between official and parallel exchange rates may reduce currency risk for foreign investors considering Nigerian assets.
However, sustained investor confidence will depend on the consistency of monetary policy and the durability of foreign exchange market reforms.
RISK RADAR
Currency stability remains vulnerable to external shocks, particularly fluctuations in global oil prices and capital flow volatility.
Inflation risk continues to pose a challenge for monetary authorities seeking to balance price stability with economic growth.
Policy credibility risk also persists, as investors closely monitor whether the current reform framework remains consistent under future economic pressures.
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