The Governor of the Central Bank of Nigeria (CBN), Olayemi Cardoso, has cautioned that excess liquidity and spending associated with the 2027 election cycle could undermine Nigeria’s hard-earned economic stability if not carefully managed.
Speaking at the National Economic Council (NEC) Conference 2026 at the Presidential Villa, themed “Delivering Inclusive Growth and Sustainable National Development: The Renewed Hope National Development Plan,” Cardoso made the remarks during a panel session on “Fiscal and Monetary Outlook 2026–2030: Priorities and Imperatives.”
He recalled the severe economic challenges his administration inherited, including persistent inflation, a dysfunctional foreign exchange (FX) market, and a backlog of over $7 billion in unmet FX obligations.
According to him, the parallel market premium had exceeded 16 percent, eroding investor confidence, while direct interventions by the Central Bank rose to an unprecedented N10.93 trillion.
“These measures may have provided short-term relief.
“But they created long-term distortions, excess liquidity, and significantly increased the cost of liquidity management,” he said.
Cardoso outlined a three-pillar strategy that helped restore stability. The first was decisive monetary tightening, including an aggressive 875 basis-point increase in the Monetary Policy Rate to curb inflation and a return to orthodox monetary policy, alongside phasing out quasi-fiscal interventions.
The second pillar focused on transparency and market-driven reforms, including unifying the FX market, clearing the FX backlog, and strengthening institutional transparency.
Third, he stressed enhanced fiscal coordination, particularly adherence to statutory limits on deficit financing and a sharp reduction in Ways and Means advances to the Federal Government—from 2.65 percent in 2023 to 0.69 percent in 2024.
Cardoso said the reforms have yielded tangible results, citing sustained GDP growth of 3.98 percent, improved current account performance with a $3.42 billion surplus recorded in the third quarter, inflation moderated to 15.15 percent, and external reserves rising to $49 billion as of February 5, 2026.
He noted that when the current CBN leadership assumed office, net reserves stood at about $3 billion. “Today, the gap between the official and parallel market rates has narrowed to under two percent. The naira is now competitive and predictable,” he said.
Looking ahead to 2026–2030, Cardoso said the CBN would focus on sustaining disinflation, normalizing the FX market, and strengthening financial system resilience, including transitioning toward inflation targeting and supporting banking sector recapitalization to help drive a $1 trillion economy.
However, he warned of looming risks, particularly election-related spending. “The liquidity overhang remains in the system. During election cycles, large sums are typically injected into the economy.
“This must be carefully monitored to avoid destabilising the bold reforms that have restored stability,” he said.
Cardoso emphasized that monetary policy alone cannot guarantee lasting stability, noting that structural challenges, such as food supply shocks, energy costs, and infrastructure gaps, require coordinated fiscal and supply-side reforms.
He also highlighted the critical role of sub-national governments, which control more than 50 percent of public revenue, in shaping macroeconomic outcomes.
By 2030, he projected targets including single-digit inflation, stronger foreign exchange reserves driven by non-oil exports and foreign direct investment, deeper local currency financing, and a more financially inclusive economy.
While expressing optimism, Cardoso urged caution. “The future looks bright despite the challenges. We are committed to the reform agenda, but we are not out of the woods.
“We must remain focused, sustain policy discipline and anticipate potential headwinds,” he said.
He assured stakeholders that the Central Bank would continue to strengthen fiscal and monetary coordination to safeguard economic gains and unlock Nigeria’s full potential.
(The Sun)
