Nigeria’s Central Bank (CBN) is taking a bold step to address rising inflation by shifting from its exchange rate targeting framework to a new inflation-targeting model aimed at ensuring price stability, boosting consumer purchasing power, and stimulating economic growth.
Inflation remains one of the biggest challenges for Nigerian households and businesses, with the latest data from the National Bureau of Statistics (NBS) showing that inflation rose to 34.8% in December 2024, up from 34.6% in November. Recognizing the urgency of the situation, the CBN is rolling out new monetary policies to better manage inflation and stabilize the economy.
A Shift in Strategy to Combat Inflation
In its latest policy direction, the CBN is transitioning towards an inflation-targeting framework, a strategy that has been successfully implemented by other African central banks. This new approach is expected to strengthen the naira, improve economic stability, and support long-term growth.
At the Monetary Policy Forum 2025, CBN Governor Olayemi Cardoso highlighted the importance of this transition, emphasizing that price stability and restoring Nigerians’ purchasing power remain top priorities.
“These actions have already yielded results,” Cardoso said, pointing to relative stability in the foreign exchange market, narrowing exchange rate disparities, and an increase in external reserves to over $40 billion as of December 2024.
Monetary and Fiscal Coordination for a Stronger Economy
While the CBN is tightening monetary policy, Governor Cardoso stressed that collaboration with fiscal authorities is crucial for achieving lasting economic stability. He noted that “managing disinflation amidst persistent economic shocks requires not just strong monetary policies, but also alignment with fiscal strategies to anchor investor confidence and economic stability.”
The bank is also working on strengthening the financial sector, including the introduction of new minimum capital requirements for banks (effective March 2026) to ensure stability in the banking system as Nigeria moves towards its vision of a $1 trillion economy.
Additionally, the CBN launched the Nigeria Foreign Exchange Code to promote integrity, transparency, and efficiency in the forex market, with the goal of rebuilding trust and inspiring confidence in the financial system.
Boosting Financial Inclusion and Economic Growth
Recognizing the importance of financial inclusion, the CBN is prioritizing initiatives to support women entrepreneurs through the Women Entrepreneurs Finance (We-FI) program, which is part of the National Financial Inclusion Strategy. This initiative aims to bridge the gender gap and expand access to financial services and digital banking for women across Nigeria.
Meanwhile, remittances through International Money Transfer Operators (IMTOs) surged by 79.4% to $4.18 billion in the first three quarters of 2024, a development linked to the CBN’s foreign exchange reforms. To further boost economic activity, the CBN has also lifted a long-standing restriction that barred 41 items from accessing forex at the official market, a move expected to improve trade and investment opportunities.
Navigating Economic Challenges Amid Global Uncertainty
Despite high inflation, Nigeria’s economy continues to attract both local and foreign investors. According to Bala Bello, a member of the CBN’s Monetary Policy Committee (MPC), key economic indicators—including strong foreign reserves (rising to $40.88 billion by November 2024) and a relatively stable exchange rate—have positioned Nigeria as an attractive investment destination.
GDP growth has remained positive, with Nigeria recording a 3.46% growth rate in Q3 2024, driven by both the oil and non-oil sectors, particularly the services industry.
Meanwhile, the global inflation rate is expected to decline to 3.5% in 2025, down from its peak of 9.4% in 2022, according to CBN projections. However, external factors such as geopolitical tensions, China’s economic slowdown, and rising energy prices continue to pose risks to economic stability.
Looking Ahead: The CBN’s Commitment to Stability
Governor Cardoso reiterated the CBN’s commitment to restoring confidence in the economy, ensuring policy transparency, and maintaining its core mandate of price stability. The shift towards an inflation-targeting framework is expected to help curb inflation, stabilize the naira, and improve economic conditions for Nigerians.
While economic challenges persist, the CBN remains proactive, taking strategic steps to ensure that Nigeria’s economy remains resilient, competitive, and investor-friendly in the years ahead.
