When Olayemi Cardoso took charge of the Central Bank of Nigeria on September 22, 2023, the institution was confronting overlapping crises.

Headline inflation stood at 26.72 per cent, the Monetary Policy Rate was 18.75 per cent, and gross external reserves were about $33.2bn. The official exchange rate was around N770 to the dollar, but limited liquidity meant many businesses could not obtain foreign currency at that price.

The bank also faced more than $7bn in unsettled foreign exchange obligations, an expanding development-finance portfolio and weakened confidence in monetary management.

Cardoso’s response was built around a return to conventional central banking. The CBN scaled back development financing, tightened monetary conditions, reduced discretionary foreign exchange allocation and raised capital requirements for banks.

Three years later, the picture has improved considerably, although high costs remain. Reserves have climbed above $55bn, the foreign exchange market has become more transparent, banks have raised trillions of naira in fresh capital, and inflationary pressures have moderated.

But interest rates remain high, the naira is substantially weaker than in 2023, and households continue to bear the accumulated effects of earlier increases in food, transport, energy and housing costs.

Tightening to recalibration

Cardoso’s most consequential shift was returning price stability to the centre of monetary policy.

Under the previous leadership, the CBN became heavily involved in financing agriculture, manufacturing, aviation, electricity and other sectors. Cardoso’s administration began reducing direct interventions and concentrating on inflation, liquidity management and financial stability.

He recently defended the return to orthodox monetary policy, arguing that the previous approach had blurred institutional responsibilities.

A recent statement from the apex bank read, “According to him, these challenges blurred the distinction between fiscal and monetary responsibilities, reduced transparency, and limited the effectiveness of policy interventions. He also observed that the foreign exchange market was opaque and inefficient, while weak fiscal-monetary coordination further constrained economic outcomes.”

When the MPC reconvened in February 2024 after a prolonged break, it raised the MPR by 400 basis points from 18.75 per cent to 22.75 per cent. The rate rose to 24.75 per cent in March, 26.25 per cent in May, 26.75 per cent in July, 27.25 per cent in September and 27.50 per cent in November.

The tightening cycle began reversing in September 2025 when the MPC reduced the rate by 50 basis points to 27 per cent. It held the rate in November before another 50-basis-point reduction to 26.5 per cent in February 2026. The benchmark was retained in May and July.

A bigger shift came in September when the MPC reset the MPR by 350 basis points to 23 per cent and recalibrated the Standing Facilities Corridor to +50/-300 basis points. It retained the Cash Reserve Requirement at 45 per cent for deposit money banks.

Cardoso described the move not simply as easing but as a reset intended partly to reconnect the policy rate with prevailing money-market conditions and improve monetary-policy transmission.

Headline inflation, which peaked at 34.80 per cent in December 2024 under the old Consumer Price Index, stood at 15.39 per cent in August 2026.

However, the National Bureau of Statistics rebased the CPI in January 2025, changed expenditure weights and adopted a new reference year, meaning the old and new series are not directly comparable.

The rebased series nevertheless indicates moderating inflationary pressure. Inflation eased from 15.93 per cent in May to 15.91 per cent in June, 15.43 per cent in July and 15.39 per cent in August.

The next challenge is transmission. Commercial lending rates exceeded 30 per cent in parts of the market during the tightening cycle. Private-sector credit increased by eight per cent from N74.63tn in April 2025 to N80.59tn in April 2026, while credit to the government jumped 65.4 per cent from N23.93tn to N39.60tn.

The Chief Executive Officer of the Centre for the Promotion of Private Enterprise, Muda Yusuf, has warned that rising Federal Government borrowing from the domestic financial system is increasingly crowding out businesses as banks favour lower-risk, high-yield government securities.

The September rate reset therefore begins a different test: whether improving monetary conditions will reduce borrowing costs and redirect more credit towards productive businesses.

Reforms rebuild buffers

The foreign exchange market offers some of the clearest evidence of improvement under Cardoso, although it also imposed perhaps the most visible adjustment costs.

Exchange-rate unification began in June 2023 before he assumed office. Cardoso inherited a market with more than $7bn in unsettled obligations, a wide official-parallel market gap and weak confidence among businesses and investors.

The CBN verified the outstanding claims and subsequently announced that it had cleared all valid obligations. It introduced the Electronic Foreign Exchange Matching System, revised regulations for Bureau de Change operators and strengthened reporting requirements for authorised dealers and International Money Transfer Operators.

In May 2026, the bank launched the fourth edition of the Foreign Exchange Manual, while licensed BDCs gained structured access to foreign exchange through authorised dealer banks.

Emerging markets expert Ike Ibeabuchi earlier acknowledged the reforms while stressing that other factors also contributed.

“Cardoso introduced several reforms that have stabilised the FX market. But he is also lucky to have met Dangote Refinery and a reform-minded president who has made his work quite easier,” Ibeabuchi said.

The reforms did not prevent substantial depreciation. From about N770/$ in September 2023, the official rate weakened beyond N1,600/$ during periods of volatility before subsequently recovering.

External buffers, however, strengthened substantially. Gross reserves increased from about $33.2bn when Cardoso assumed office to $40.19bn at the end of 2024 and $45.71bn at the end of 2025.

By September 18, 2026, the MPC put gross external reserves at $55.25bn, their highest level in 18 years and sufficient to cover about 11.3 months of imports. Compared with the roughly $33.2bn inherited in September 2023, that represents an increase of about $22.05bn or 66.4 per cent.

The quality of the reserve position also improved. Net foreign exchange reserves rose from $3.99bn at the end of 2023 to $23.11bn in 2024 and $34.80bn in 2025. Nigeria’s balance of payments moved from deficits of $3.32bn in 2022 and $3.34bn in 2023 to a $6.83bn surplus in 2024.

But the composition of capital flows remains important. Portfolio investment accounted for $5.2bn, or 92.25 per cent, of capital importation in the first quarter of 2025, compared with foreign direct investment of only $126.29m.

The Director of Deals Advisory at PwC, Wale Olusi, earlier argued that monetary policy should not be framed simply as a contest between foreign portfolio investors and domestic businesses.

“That is the job of the central bank. They target job stabilisation of the macroeconomy, which they have achieved,” Olusi said.

The September rate reduction now changes that balancing act. Lower rates could support domestic investment and reduce financing costs, but they must be managed without undermining foreign-exchange stability.

Banks face credit test

Cardoso also initiated Nigeria’s largest banking recapitalisation programme since the 2004 consolidation exercise.

In March 2024, the CBN raised minimum capital requirements to N500bn for commercial banks with international authorisation, N200bn for national banks and N50bn for regional banks.

Merchant banks were required to maintain N50bn, while non-interest banks faced thresholds of N10bn or N20bn depending on their licences. By the March 31, 2026 deadline, 33 banks had reportedly met the revised requirements, raising approximately N4.65tn, with 72.55 per cent coming from domestic investors.

The recapitalisation should strengthen banks’ ability to absorb shocks and finance larger transactions, but the bigger economic question is how the additional capital will be deployed.

President Bola Tinubu recently challenged banks to convert stronger balance sheets into affordable financing for businesses.

Speaking through the Minister of Finance and Coordinating Minister of the Economy, Taiwo Oyedele, he said, “A resilient banking system cannot exist indefinitely where businesses cannot obtain affordable credit, manufacturing that is struggling cannot expand, and millions of productive MSMEs remain outside of the formal financial system.”

That challenge has become more significant following the September rate reset. Banks now have substantially larger capital buffers and a lower benchmark interest rate, but the CRR remains high at 45 per cent.

Converting stronger bank capital and lower policy rates into affordable financing for manufacturing, agriculture, infrastructure, exports and MSMEs is therefore emerging as one of the biggest tests of the next phase of Cardoso’s reforms.

Harder test begins

Economic activity has strengthened alongside the improvement in financial indicators.

Real GDP expanded by 4.43 per cent in the second quarter of 2026, accelerating from 3.89 per cent in the first quarter. The Purchasing Managers’ Index reached 54.3 points in August, signalling continued expansion in business activity.

But the productive economy has not moved at the same pace. Manufacturing grew by 3.24 per cent in the second quarter, while its share of real GDP declined from 7.81 per cent to 7.72 per cent.

This distinction increasingly defines Cardoso’s next challenge.

During the signing of a Memorandum of Understanding on Fiscal-Monetary Policy Coordination between the Federal Ministry of Finance and the CBN, Oyedele said the government’s objective was to push inflation sustainably into single digits.

“Our objective is to bring inflation sustainably into single digits and keep it there — and that cannot be monetary policy’s job alone,” he said.

“Fiscal policy must play its part: disciplined, disinflationary spending; sound cash and liquidity management; efficient financing that does not crowd out the private sector.”

The International Monetary Fund has similarly urged Nigeria and other major African economies to deepen fiscal, monetary and governance reforms, identifying tax policy, revenue mobilisation, public financial management and spending efficiency among Nigeria’s continuing priorities.

Three years into Cardoso’s tenure, the policy challenge has consequently shifted.

The early phase was dominated by crisis management — rebuilding confidence in the foreign exchange market, tightening liquidity, strengthening reserves, recapitalising banks and containing inflation.

The September reduction of the MPR to 23 per cent signals the beginning of a different phase.

The CBN must now demonstrate that the stability it has spent three years building can translate into cheaper business credit, stronger private investment and faster productive-sector growth without reigniting inflation or destabilising the naira.

For ordinary Nigerians, the benchmark will be even more straightforward. Falling inflation does not reverse previous price increases, higher reserves do not automatically raise household incomes, and stronger bank balance sheets mean little if businesses cannot borrow affordably enough to expand and create jobs.

Cardoso’s first three years have largely been about rebuilding monetary and financial stability. The harder test is whether those gains can now move beyond the CBN’s balance sheet and macroeconomic indicators to businesses, jobs, incomes and household living standards.