The Central Bank of Nigeria (CBN), under the leadership of Governor Yemi Cardoso, has undergone a significant transformation over the past two years, marked by notable achievements in financial system reform, according to a review by the Centre for the Promotion of Private Enterprise (CPPE).
The report, authored by CPPE’s Chief Executive Officer, Dr. Muda Yusuf, commends the CBN’s efforts to restore confidence and credibility but also raises key concerns about the impact of its current monetary policy on economic growth.
The CPPE highlights several major successes of the Cardoso-led administration, including the liberalization and unification of the foreign exchange (FX) market.
This action eliminated multiple FX windows, which reduced opportunities for arbitrage and corruption. It also led to improved liquidity from autonomous sources and enhanced market efficiency.
The CBN has also made progress in strengthening its corporate governance by improving oversight mechanisms and internal controls. The report notes a reduction in political interference in policy decisions, which has enhanced the bank’s professionalism and operational independence.
Additionally, the CBN has introduced measures like recapitalization to enhance the soundness of banks and has strengthened regulatory frameworks to maintain stability. Through monetary policy tools such as interest rate hikes and liquidity management, the CBN has contributed to a recent deceleration in inflation and the restoration of macroeconomic stability.
Despite these positive developments, the CPPE report outlines several areas of concern. The current policy stance, with a Monetary Policy Rate (MPR) at 27.5% and a Cash Reserve Ratio (CRR) at 50%, is described as highly restrictive. This has pushed up the cost of funds and suppressed private sector borrowing, particularly for critical sectors like manufacturing, agriculture, and SMEs.
The report warns of a crowding-out effect, where private investment is displaced by high-yield government instruments.
The CPPE also argues that a fully market-based approach has not addressed fundamental financing gaps. Small and medium enterprises (SMEs) continue to face limited access to affordable credit, while long-term projects in infrastructure, industry, and real estate lack patient capital and affordable funding mechanisms.
To address these concerns, the CPPE has issued several policy recommendations. The report urges the CBN to gradually ease the CRR and MPR as inflation moderates to create a more enabling credit environment.
It also recommends complementing monetary tightening with supply-side measures to address the structural drivers of inflation.
The CPPE advocates for developing credit guarantee schemes and concessionary financing programs for SMEs and other vital sectors of the economy.
Furthermore, the report calls for institutionalizing corporate governance standards to ensure reforms last beyond the current leadership and for strengthening legal frameworks to protect the CBN’s autonomy from political pressures.
The CPPE further added that the next phase of reforms must focus on achieving a balanced policy stance that supports growth while preserving macroeconomic stability.