CBN: Policy Interventions Prevented Inflation from Hitting 42.81%.

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The Central Bank of Nigeria (CBN) has revealed that its policy interventions prevented inflation from soaring to 42.81% by December 2024. According to CBN Governor Olayemi Cardoso, “counterfactual estimates suggest that without these decisive policy interventions, inflation could have reached 42.81% by December 2024.”

The CBN implemented several bold policy measures across six Monetary Policy Committee meetings in 2024. These measures included raising the monetary policy rate by 875 basis points to 27.50%, increasing the cash reserve ratio for other depository corporations by 1,750 basis points to 50.00%, and adjusting the asymmetric corridor around the MPR. Cardoso explained, “Throughout 2024, the Bank implemented several bold policy measures across six MPC meetings, including raising the Monetary Policy Rate by a cumulative 875 basis points to 27.50%, increasing the Cash Reserve Ratio of Other Depository Corporations by 1,750 basis points to 50.00%, and adjusting the asymmetric corridor around the MPR.”

The CBN also implemented critical foreign exchange reforms to enhance market efficiency. Key reforms include:

– *Unification of Exchange Rate Windows*: Contributed to a 79.4% rise in remittances via International Money Transfer Operators to $4.18 billion in the first three quarters of 2024.

– *Clearing FX Backlog*: Cleared a $7 billion FX backlog, restoring market confidence and improving FX liquidity.

– *Lifting Restrictions*: Lifted restrictions on 41 items previously banned from access to the official FX market since 2015.

– *New Minimum Capital Requirements*: Introduced new minimum capital requirements for banks, effective March 2026, to enhance resilience and global competitiveness in the sector.

Additionally, the CBN launched the WIFI initiative to bridge the gender gap in financial access and introduced the Nigeria Foreign Exchange Code to ensure integrity, transparency, and efficiency in the FX market. Cardoso described the code as “a binding commitment by the financial sector to rebuild trust and boost confidence.”

The CBN projects that diaspora remittances will rise to N31.79 trillion when fourth-quarter figures for 2024 are released. Deputy Governor Mohammed Sani Abdullahi noted that diaspora remittances rose from N12.48 trillion in 2023 to N22.73 trillion by Q3 2024.

Cardoso warned that managing disinflation amid persistent shocks would require strong policy coordination between fiscal and monetary authorities. He emphasized the need for bold and coordinated policy measures to consolidate progress and achieve price stability. The CBN Governor expressed optimism that Nigeria had turned a corner and that disinflation was within reach.

Cardoso noted that global capital flows to emerging markets could improve as advanced economies ease monetary policies. However, he stressed that Nigeria’s ability to attract inflows would depend on investor confidence in domestic reforms, macroeconomic stability, and positive real returns on investment.

He reiterated that the CBN’s transition from unorthodox to orthodox monetary policies was aimed at restoring confidence, strengthening policy credibility, and prioritizing price stability. Encouragingly, he said, FX liquidity is improving, and the naira is gradually aligning with market fundamentals, creating a more predictable environment for production, exports, and essential imports.

Speaking earlier, CBN Deputy Governor, Economic Policy, Mohammed Sani Abdullahi, said the liberalization of the FX market was a crucial step in unifying the fragmented system and reducing speculative-driven premiums. He noted that before the adoption of a flexible exchange rate regime, the average FX premium stood at 62.33 percent between January and May 2023.

However, following the reform, the premium dropped to 0.10 percent by June 2023, indicating significant progress towards market convergence. Abdullahi said, “Prior to the adoption of a flexible exchange rate regime, the average exchange rate premium stood at an alarming 62.33 percent between January and May 2023.

“With the introduction of the flexible exchange rate regime, this premium was drastically reduced to an all-time low of 0.10 percent by June 2023, signaling significant progress towards market convergence.”

The deputy governor revealed that diaspora remittances rose from N12.48tn in 2023 to N22.73tn by Q3 2024 and are projected to hit N31.79tn when full-year data is released. Despite these gains, Abdullahi acknowledged that disinflation efforts had been hindered by persistent supply and demand shocks, making it difficult to achieve a single-digit inflation target.

He noted that these shocks, among other factors, necessitated decisive policy actions to prevent entrenched inflationary expectations. He added that this highlighted the critical importance of sustained communication and engagement with stakeholders, a commitment exemplified by the forum.

Abdullahi said, “The gains from the FX reforms and the recovery in diaspora remittances underscore the importance of our policy choices. However, despite these positive developments, we acknowledge that the road to single-digit inflation will be long and challenging.

“We must remain vigilant and proactive in our policy responses to mitigate the impact of potential shocks and ensure that our inflation-targeting framework is effective in delivering price stability.

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