The battle against spiraling inflation entered a new phase with the Central Bank of Nigeria’s plan to adopt an inflation targeting framework to price management.
The framework, which is also being implemented by central banks of several African countries, is expected to strengthen Nigerians’ purchasing power, disposable income, drive aggregate demand and stimulate production.
The effects of rising inflation are felt by households and businesses across the nooks and crannies of the country.
That is why price stability is one of the core mandates of the CBN which is working on adopting and implementing an inflation targeting framework for the economy.
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The framework, expected to replace the exchange rate targeting framework, will be implemented with the backing of the people.
In its efforts to tame inflation, the CBN recently hosted the Monetary Policy Forum 2025, featuring fiscal authorities, legislative, private sector, development partners, subject-matter experts, and scholars with the theme: “Managing the Disinflation Process”.
The forum is a major push to improve monetary policy communication, foster dialogue, and collaborate on critical issues shaping monetary policy.
During the event, Olayemi Cardoso, the CBN governor, explained that the apex bank’s focus is to sustain price stability, the planned transition to an inflation-targeting framework, and strategies to restore purchasing power and ease economic hardship.
He said the Abuja-based is continuing its disciplined approach to monetary policy, aimed at curbing inflation and stabilizing the economy.
“These actions have yielded measurable progress: relative stability in the FX market, narrowing exchange rate disparities, and a rise in external reserves to over $40 billion as of December 2024.
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Cardoso reiterated that the goal of the CBN is to ensure that monetary policy remains forward-looking, adaptive, and resilient.
In addressing our economic challenges, collaboration is key: “Managing disinflation amidst persistent shocks requires not only robust policies but also coordination between fiscal and monetary authorities to anchor expectations and maintain investor confidence,” Cardoso said.
“Our focus must remain on price stability, the planned transition to an inflation-targeting framework, and strategies to restore purchasing power and ease economic hardship,” he added.
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The CBN also focused on strengthening the banking sector, introducing new minimum capital requirements for banks (effective March 2026) to ensure resilience and position Nigeria’s banking industry for a $1 trillion economy.
This week, the CBN launched the Nigeria Foreign Exchange Code, marking a decisive step forward for integrity, fairness, transparency and efficiency in our FX market. Built on six core principles, it represents a binding commitment from the financial community to rebuild trust and inspire confidence.
According to the CBN, financial inclusion also remains a priority. The Women Entrepreneurs Finance (We-FI) initiative under the National Financial Inclusion Strategy is bridging the gender gap, ensuring more women have access to financial services and digital tools.
Remittances through IMTOs rose 79.4 per cent to US$4.18 billion in the first three quarters of 2024, demonstrating the positive impact of FX reforms. Additionally, the CBN lifted the 2015 restriction barring 41 items from accessing FX at the official market to enhance trade and investment.
These reforms and developments reflect the Bank’s commitment to creating an enabling environment for inclusive economic development. However, achieving macroeconomic stability requires sustained vigilance and a proactive monetary policy stance.
“As we shift from unorthodox to orthodox monetary policy, the CBN remains committed to restoring confidence, strengthening policy credibility, and staying focused on its core mandate of price stability,” Cardoso stated.
He said moving from the exchange rate targeting framework to the inflation targeting framework aligned with the apex bank’s determination to bring inflation upsurge under control in line with its price stability mandate.
Inflation uptick has remained a major concern to the CBN and is the time to use monetary policy tools to control it.
Already, the data from the National Bureau of Statistics (NBS) showed that the inflation rate in Nigeria increased to 34.8 percent in December from 34.6 percent in November of 2024.
Inflation rate in Nigeria is expected to fall to 32.00 percent by the end of this quarter, according to Trading Economics global macro models and analysts expectations.
Market data showed that the various oil price shocks, Covid-19 pandemic, and most recently, the war between Russia and Ukraine, have resulted in various shocks to the global economy, requiring changing responses to subdue the monetary and fiscal authorities in the advanced and emerging market economies.
To address these shocks, the CBN plans to migrate from an exchange rate targeting framework to phased migration and now inflation targeting framework.
The CBN has been controlling the growth of money supply to achieve price stability, but is seeking a change of strategy to achieve better results.
Despite inflation spike, economy remains attractive to investors
A member of the Central Bank of Nigeria (CBN)-led Monetary Policy Committee (MPC), Bala Bello, listed key indicators that overtime kept domestic and foreign investors attracted to the economy.
In his personal statement during the last MPC meeting held in Abuja, he said the external reserves position has grown remarkably to $40.88 billion as of 21st November 2024 from $40.06 billion at end-October 2024.
The upsurge in reserves levels, he said, strengthens the needed buffer to mitigate unforeseen risks and reinforces the importance of ongoing efforts at sustaining improved foreign exchange supply.
Bello said the rising reserves position, alongside the relatively stable exchange rate, would enhance Nigeria’s position as an attractive investment destination.
He maintained that the resilience of the domestic economy, bolstered by a strong financial system with robust soundness indicators, instill confidence in the economic structure.
“Major prudential ratios, such as capital adequacy, liquidity, and Non-Performing Loans ratios, were within prudential limits, reflecting proactive regulatory oversight and strong industry risk management practices. Significant credit was extended to growth-enhancing sectors such as agriculture, manufacturing and general commerce, as well as individuals and households,” he said.
According to the MPC member, this credit played a crucial role in stimulating economic activities and supporting output performance, emphasising the role of financial institutions in the economy.
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He disclosed that the results of stress tests showed that bank’s solvency and liquidity ratios remained resilient in scenarios of potential severe macroeconomic shocks. Continued vigilance is, however, required to ensure that the banking system remains strong and stable amid lingering risks.
He added that everyone has a role to play in this, and our collective vigilance is crucial for the stability of our financial system.
Continuing, he said that notwithstanding, Nigeria’s Real Gross Domestic Product (GDP) has maintained a positive trajectory, with a growth rate of 3.46 per cent in the third quarter of 2024, compared with 3.19 and 2.54 per cent in the preceding and corresponding periods, respectively.
“This growth, driven by both the oil and non-oil sectors, with a notable contribution from the Services sector, is a testament to the resilience of our economy. The non-oil sector grew by 3.37 per cent in the third quarter, compared with 2.80 per cent in the second quarter, while the oil sector grew by 5.17 per cent (year-on-year), compared with 10.15 per cent in the preceding quarter.
“The positive growth 12 momentum, shown by leading indicators and staff forecasts, is expected to persist, providing a sense of stability and progress,” he said.
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Another MPC member, Aloysius Ordu, said CBN staff presentations show noteworthy green shoots since the era of tight money began.
“First, there has been a marked improvement in the current account balance. Q3 2024 data shows a surplus of US$6.29 billion vis-à-vis US$5.14 billion in Q2 2024; and the overall balance of payment position recorded a surplus of US$3.79 billion,” he said.
“Second, the external reserves stood at US$40.88 billion at the end-October 2024, a remarkable 16.9 months of import cover. The exchange rate remained relatively stable for most of the second half of 2024, reflecting increased capital inflows on account of attractive yields,” he added.
On his part, another member of MPC, Bandele Amoo, said Nigeria’s Balance of Payments (BOP) position remained stable to support our external sector stability.
The BOP provisionally recorded a surplus in the third quarter of 2024 driven by positive balances in the current account and net asset acquisition positions.
The overall account positively stood at US$3.79 billion as at Q3 of 2024. Meanwhile, portfolio inflows remain high, recording a net inflow US$0.59 billion as at November 2024.
“The total foreign exchange flows through the economy stood at US$6,175 billion in September 2024 compared with $2,570.6 billion in August 2024. Furthermore, foreign reserves at the end of October 2024 stood at $39.68 billion, equivalent to several months of import cover”.
“External reserves are projected to further increase by year end due to expected reduction in import demand pressures arising from the full deregulation of the downstream oil sector, reduced petroleum products importation regime, increased inflows and other process management by the CBN,” he said.
Global inflation statistics
Earlier, Cardoso said global inflation is projected to decline to 3.5 percent in 2025, down from its peak of 9.4 percent in 2022.
Speaking during the last Chartered Institute of Bankers of Nigeria (CIBN) Bankers Dinner in Lagos, he said major central banks are gradually easing their monetary conditions and this shift is slowly reopening access to international capital markets for emerging economies.
However, global growth remains subdued at 2.6 percent, hindered by geopolitical tensions, China’s economic slowdown, and growing trade fragmentation.
He said Sub-Saharan Africa has seen modest growth of 3.6 per cent last year, while still lagging pre-pandemic levels.
“The effects of monetary tightening measures have helped to curb inflation in some key markets such as South Africa and Kenya but many countries are still grappling with double-digit inflation rates and high debt service burdens. These challenges constrain the resources available for critical investment in education, healthcare and infrastructure,” he said.
While food prices remain a key contributor to the uptick, the MPC members recently commended the efforts of the Federal Government for the improved security, especially in the North-East of the country, which would likely improve food production.
The committee also noted the role of rising energy prices on the general price level due to its impact on factors of production. The recent increase in the price of Premium Motor Spirit (PMS) has also impacted the cost of production and distribution of food items and manufactured goods.
The committee was optimistic that the full deregulation of the downstream sub-sector of the petroleum industry would eliminate scarcity and stabilise price levels in the short to medium term.
Members of the MPC thus reiterated the need to strongly forge ahead with the deepening collaboration between the monetary and fiscal authorities to ensure the achievement of our synchronized objectives of price stability and sustainable growth.
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