In a striking demonstration of economic stewardship, the Central Bank of Nigeria (CBN) has recorded a monumental shift in its financial performance, moving from a substantial ₦1.3 trillion deficit in 2023 to an impressive ₦165 billion surplus in 2024. This remarkable turnaround, detailed in an independent assessment by the Transparency Advocacy for Development Initiative (TADI), a prominent Nigerian policy think-tank, underscores the transformative reforms spearheaded by CBN Governor Yemi Cardoso. Alongside this fiscal achievement, the CBN has bolstered Nigeria’s foreign exchange reserves to $38.8 billion, signaling a strengthened capacity to navigate the complexities of the global economy.
The TADI report, unveiled in a high-profile event in Nigeria’s capital city, Abuja, attributes the CBN’s financial recovery to a combination of strategic policy interventions, enhanced transparency, and robust governance frameworks. These efforts have not only stabilized the apex bank’s financial standing but have also positioned Nigeria’s economy on a path toward greater resilience and sustainable growth. The report highlights key drivers of this success, including higher foreign exchange revenues, stringent cost-control measures, and ongoing reforms in the foreign exchange market. These reforms, notably the unification of exchange rates under a market-driven “willing buyer, willing seller” model and the clearance of a verified foreign exchange backlog, have been pivotal in restoring confidence in Nigeria’s monetary system.
A Turnaround Rooted in Strategic Reforms
The CBN’s journey from a ₦1.3 trillion deficit to a ₦165 billion surplus is a testament to the efficacy of Governor Cardoso’s reform agenda, which has prioritized fiscal discipline and operational efficiency. In 2023, Nigeria’s central bank faced significant challenges, including mounting fiscal pressures, dwindling foreign reserves, and a volatile foreign exchange market. These issues were compounded by global economic headwinds, such as rising commodity prices and supply chain disruptions, which exacerbated Nigeria’s economic vulnerabilities as a net importer of goods and services.
Under Cardoso’s leadership, the CBN embarked on a series of bold measures to address these challenges. One of the cornerstone reforms was the unification of Nigeria’s multiple exchange rates, a policy long advocated by international financial institutions such as the International Monetary Fund (IMF) and the World Bank. Prior to this reform, Nigeria operated a complex system of exchange rates, with official, parallel, and black-market rates creating distortions in the economy. This multiplicity fueled arbitrage opportunities, eroded investor confidence, and strained the CBN’s ability to manage foreign exchange demand effectively.
The adoption of the “willing buyer, willing seller” model marked a significant departure from the previous regime of controlled exchange rates. By allowing market forces to determine the value of the naira, the CBN aimed to eliminate distortions, enhance transparency, and attract foreign investment. While the transition to a unified exchange rate was not without challenges—most notably the initial depreciation of the naira—it has yielded tangible benefits. The TADI report notes that the policy has contributed to higher foreign exchange revenues, which have been instrumental in the CBN’s financial recovery and the accumulation of foreign reserves.
In addition to exchange rate unification, the CBN successfully cleared a verified foreign exchange backlog that had accumulated over several years. This backlog, consisting of unmet foreign currency obligations to businesses, investors, and other stakeholders, had been a significant impediment to economic growth. By addressing these liabilities, the CBN restored trust among international partners and domestic stakeholders, paving the way for improved capital inflows and enhanced economic stability.
Strengthening Fiscal Discipline and Cost Management
The TADI report also credits the CBN’s financial turnaround to stringent cost-control measures implemented under Cardoso’s leadership. In previous years, the central bank’s operations were burdened by inefficiencies, including high administrative costs and quasi-fiscal activities that blurred the lines between monetary policy and fiscal interventions. These quasi-fiscal roles, such as direct financing of government projects and subsidies, had placed significant strain on the CBN’s balance sheet, contributing to the ₦1.3 trillion deficit recorded in 2023.
To address these challenges, the CBN introduced a 10-point reform agenda aimed at streamlining its operations and phasing out quasi-fiscal activities. This agenda emphasized the separation of monetary policy functions from fiscal responsibilities, ensuring that the CBN focused on its core mandate of maintaining price stability and managing the nation’s monetary system. By reducing unnecessary expenditures and optimizing resource allocation, the CBN was able to achieve significant cost savings, which played a critical role in the transition to a surplus in 2024.
Moreover, the CBN’s commitment to fiscal discipline was complemented by efforts to enhance income generation. The increase in foreign exchange revenues, driven by a combination of higher oil prices and improved remittance flows, provided a much-needed boost to the CBN’s financial position. Nigeria, as one of Africa’s largest oil producers, has historically relied on oil exports as a primary source of foreign exchange earnings. In 2024, favorable global oil market conditions, coupled with the CBN’s strategic interventions, enabled the bank to capitalize on these revenues to strengthen its reserves and stabilize the naira.
Tackling Inflation and Enhancing Transparency
While the CBN’s financial achievements are noteworthy, the TADI report acknowledges that inflation remains a significant challenge for Nigeria’s economy. Despite recent progress, inflationary pressures continue to impact households and businesses, driven by factors such as rising food and energy costs, supply chain constraints, and the lingering effects of exchange rate depreciation. To address this, the CBN has implemented a series of monetary policy measures, including interest rate hikes and liquidity mop-up operations, aimed at curbing excess money supply and stabilizing prices.
The report notes that these measures have begun to yield results, with inflation showing signs of moderation in 2024. However, the battle against inflation is far from over, and the CBN must maintain a delicate balance between tightening monetary policy and supporting economic growth. Excessive tightening could stifle economic activity, particularly in sectors such as agriculture and manufacturing, which are critical to Nigeria’s diversification efforts. Conversely, insufficient action could allow inflation to spiral, further eroding purchasing power and exacerbating poverty.
In addition to its monetary policy efforts, the CBN has made significant strides in enhancing transparency and accountability. One of the standout achievements highlighted in the TADI report is the publication of financial statements compliant with International Financial Reporting Standards (IFRS). This move represents a significant step toward aligning Nigeria’s central banking practices with global best practices, fostering greater trust among investors and international partners. The adoption of IFRS-compliant reporting has also improved the CBN’s ability to provide accurate and timely information to stakeholders, enhancing its credibility as a responsible financial institution.
The TADI report assigns the CBN a score of 6.5 out of 10 for policy effectiveness, reflecting the success of its reforms in driving financial recovery and reserves growth. On transparency and governance, the bank scored an impressive 7.5 out of 10, a testament to its commitment to openness and accountability. These scores underscore the progress made under Cardoso’s leadership, while also highlighting areas for further improvement, particularly in addressing inflation and foreign exchange volatility.
Building Robust Foreign Reserves
The increase in Nigeria’s foreign exchange reserves to $38.8 billion is another key highlight of the CBN’s achievements in 2024. Foreign reserves are a critical indicator of a country’s economic health, providing a buffer against external shocks and enabling the government to meet its international obligations. For Nigeria, which relies heavily on imports for consumer goods, industrial inputs, and capital equipment, a robust reserve position is essential for maintaining economic stability.
The TADI report praises the CBN’s reserves management strategy, which has focused on prudent accumulation and efficient allocation of foreign exchange resources. By leveraging higher oil revenues, remittance inflows, and proceeds from external borrowings, the CBN has been able to rebuild its reserves, which had previously been depleted by years of economic challenges. The $38.8 billion reserve level represents a significant improvement from previous years and positions Nigeria favorably in the global economy.
However, the report cautions that sustaining this reserve growth will require continued vigilance, particularly in light of global economic uncertainties. Factors such as fluctuations in oil prices, geopolitical tensions, and shifts in global trade dynamics could pose risks to Nigeria’s reserve position. To mitigate these risks, the CBN must continue to diversify its sources of foreign exchange earnings, including by promoting non-oil exports and attracting foreign direct investment (FDI).
Challenges and Opportunities Ahead
Despite the CBN’s impressive achievements, the TADI report underscores several challenges that remain on the horizon. Inflation, though showing signs of easing, continues to be a major concern for policymakers. The high cost of living has placed significant pressure on Nigerian households, many of whom struggle to afford basic necessities such as food, housing, and transportation. Addressing inflation will require a coordinated approach involving both monetary and fiscal policies, as well as structural reforms to boost domestic production and reduce reliance on imports.
Foreign exchange volatility is another key challenge highlighted in the report. While the unification of exchange rates has brought greater transparency to the market, it has also exposed the naira to fluctuations driven by supply and demand dynamics. To stabilize the currency, the CBN must continue to build investor confidence through consistent policy implementation and proactive communication with stakeholders. Additionally, efforts to deepen Nigeria’s foreign exchange market, such as increasing participation by non-bank financial institutions, could help enhance liquidity and reduce volatility.
On the opportunity side, the CBN’s success in achieving a financial surplus and building reserves provides a strong foundation for further reforms. The bank’s 10-point reform agenda, which includes measures to enhance digital financial services, promote financial inclusion, and strengthen cybersecurity, offers a roadmap for sustaining Nigeria’s economic progress. By leveraging technology and innovation, the CBN can drive greater efficiency in the financial sector and support the growth of small and medium-sized enterprises (SMEs), which are critical to job creation and economic diversification.
Broader Implications for Nigeria’s Economy
The CBN’s financial turnaround has far-reaching implications for Nigeria’s economy, which is the largest in Africa by nominal GDP. A stronger central bank enhances Nigeria’s ability to attract foreign investment, secure favorable terms for external borrowing, and maintain stability in the face of global economic uncertainties. The increase in foreign reserves, in particular, signals to international investors that Nigeria is a viable destination for capital, particularly in sectors such as oil and gas, agriculture, and technology.
Moreover, the CBN’s focus on transparency and governance sets a positive precedent for other public institutions in Nigeria. By adopting global best practices and prioritizing accountability, the CBN is helping to rebuild public trust in Nigeria’s economic management, which has been eroded by years of mismanagement and corruption allegations. This renewed trust could have a ripple effect across the economy, encouraging greater private sector participation and fostering a more inclusive growth model.
The reforms introduced by Governor Cardoso also align with Nigeria’s broader economic diversification agenda. By reducing the CBN’s quasi-fiscal roles and focusing on monetary policy, the bank is creating space for the private sector to drive growth in non-oil sectors such as agriculture, manufacturing, and renewable energy. These sectors are critical to reducing Nigeria’s dependence on oil and building a more resilient economy capable of withstanding external shocks.
Regional and Global Context
The CBN’s achievements must also be viewed in the context of Africa’s broader economic landscape. Across the continent, central banks are grappling with similar challenges, including high inflation, currency depreciation, and limited fiscal space. Nigeria’s success in turning around its central bank’s finances and building reserves could serve as a model for other African countries seeking to strengthen their monetary systems.
At the global level, the CBN’s reforms align with the priorities of international financial institutions such as the IMF and World Bank, which have long advocated for market-driven exchange rate regimes and greater transparency in central banking. By implementing these reforms, Nigeria is positioning itself as a responsible global player, capable of meeting its international obligations and contributing to global economic stability.
Conclusion
The Central Bank of Nigeria’s transformation from a ₦1.3 trillion deficit in 2023 to a ₦165 billion surplus in 2024 is a remarkable achievement that reflects the effectiveness of Governor Yemi Cardoso’s reform agenda. By prioritizing transparency, fiscal discipline, and market-driven policies, the CBN has not only strengthened its financial position but has also bolstered Nigeria’s foreign reserves to $38.8 billion. While challenges such as inflation and foreign exchange volatility remain, the progress made in 2024 provides a strong foundation for sustained economic growth.
The TADI report serves as both a commendation of the CBN’s achievements and a call to action for addressing lingering challenges. By continuing to implement prudent policies, enhance transparency, and promote economic diversification, the CBN can play a pivotal role in driving Nigeria toward a more prosperous and resilient future. As the nation navigates an increasingly complex global economic environment, the CBN’s leadership will be critical in ensuring that Nigeria remains on a path of sustainable development.
