Following the Central Bank of Nigeria’s decision to retain its benchmark interest rate, Governor Olayemi Cardoso used the post-Monetary Policy Committee (MPC) briefing on Tuesday to explain the bank’s position on some of the country’s most pressing financial and monetary issues.
Responding to questions from journalists after the two-day MPC meeting, Cardoso defended the CBN’s reforms, saying the banking system remains strong, the foreign exchange market is functioning transparently. He maintained that the recent slowdown in bank lending is temporary, assuring banks yet to meet new capital requirements remain under close regulatory supervision.
He also explained the significance of the newly introduced Nigerian Overnight Financing Rate (NOFR) as part of the CBN’s move towards a more transparent and market-based monetary policy framework.
Defends FX Market, Says Naira Remains Competitive
Responding to concerns about the foreign exchange market, Cardoso said the CBN was satisfied with the progress made in improving transparency and liquidity.
According to him, the country still needs stronger oil production, higher oil exports, more foreign direct investment and improved domestic productivity to reduce imports, but the foreign exchange market is now operating more efficiently.
“But we are very comfortable at the Central Bank that we have a fully functional market, a market that is open, that is transparent, a market that sometimes you find that daily the amount of turnover is in excess of 1 billion US, and a market that is responding to the positive things that we are doing as the central bank,” he said.
Cardoso added that Nigeria needs a competitive exchange rate, saying current market levels support that objective while the CBN continues to work with financial market participants.
“The country needs a competitive currency, and from every indication, the levels at which they are moving support competitiveness.”
NOFR Will Strengthen Monetary Policy Transmission
Cardoso also explained the introduction of the NOFR, describing it as a major reform that aligns Nigeria with international financial market standards.
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He said NOFR is Nigeria’s official overnight risk-free benchmark rate and reflects the actual cost of overnight secured funding between banks rather than estimates provided by financial institutions.
“This system ensures that the real transactional rates, as opposed to judgmental, are the rates that are being used.”
He said the previous approach relied on rates submitted by banks, but the new framework is based on actual market transactions, making it more transparent.
“We’re taking ourselves up to benchmark world standards. The UK, for example, has long moved away from LIBOR to Sonia, and so has the United States.”
Cardoso added that the Monetary Policy Rate (MPR) and NOFR would complement each other, with NOFR becoming an important part of Nigeria’s inflation-targeting framework.
“The NOFR will give you a clearer idea of exactly at what point transactions are being executed, and indeed going forward as we go down that road of inflation targeting, it will be a key ingredient to plug into that inflation targeting framework.”
Decline in Bank Lending Temporary
Responding to concerns over reports that deposit money banks reduced lending to major sectors after the CBN ended regulatory forbearance, Cardoso said the slowdown reflected a temporary adjustment rather than weakness in the banking sector.
He said regulatory forbearance introduced during the COVID-19 pandemic had outlived its purpose and needed to be discontinued.
“Forbearance, we felt, had outlived its time. It had outlived its time.”
According to him, banks are now adjusting their balance sheets after the policy change, resulting in lower outstanding risk assets.
“As a result of that, the banks themselves took cognisance of this, and of course, decided to now recalibrate their portfolio. And in the process of recalibrating their portfolio, not surprisingly, you would see a decrease in their outstanding risk assets.”
Cardoso stressed that the adjustment would not last as banks continue to strengthen their capital positions.
“That’s just temporary, because again, as they’ve raised more capital and they are building buffers and strengthening their capacity, that will begin to go back to a level that is commensurate with their size and their capabilities.”
He said the transition would ultimately produce a healthier credit environment.
“It reflects a transition to a more sustainable and better quality credit environment, which is what we all want.”
The CBN governor also reassured depositors that the banking system remains stable.
“The banking system continues to be safe and sound, and you will see in the fullness of time, many of these things will settle, and credit will go back up again.”
MfB Sanctions Aimed at Protecting Depositors
Cardoso also defended the CBN’s decision to revoke the licences of some Microfinance Banks, saying the actions were necessary because of long-standing compliance and supervisory failures.
“We had no choice at the time but to sanction and take out, suspend the license or take out the licenses of those banks.”
He said the regulatory actions had already prompted stronger compliance across the banking industry.
“The response to that, of course, has been that there’s been a shake-up, and the industry has come to a position where they are more alive to the responsibilities of ensuring that they meet minimum thresholds.”
According to him, protecting depositors remains the CBN’s overriding priority.
“The important thing for us is to ensure that we can, at all times, support and protect depositors’ money. That to us is the bottom line.”
He added that the severity of regulatory action would depend on the nature of each violation.
Recapitalisation Strengthens Banking Sector
Cardoso described the banking recapitalisation exercise as a major success, saying most banks met the new capital requirements without any extension of the deadline.
“I think it’s important to give ourselves credit, give the banking system credit for the enormous gains that have been made.”
He noted that 33 of the country’s 37 banks met the recapitalisation threshold and said much of the capital came from domestic investors.
“Being able to capitalise without extending deadlines, 33 were able to meet this particular threshold that we had set.”
According to him, the successful recapitalisation has significantly strengthened Nigeria’s banking industry.
“I can say to Nigerians that the industry has been considerably strengthened,”
Cardoso added that the CBN is closely supervising the few banks that are yet to meet the new capital requirement.
“They are on track. Different alternatives are being looked at to ensure that they get up to the same level as the other banks have done.”
He assured customers of the affected banks that there was no cause for concern.
“As at this point, I can confirm that you can go on with your normal business, and that those banks are under our guidance; they are strictly under our guidance, and you have nothing to worry about.”
Cardoso also used the briefing to thank journalists for helping explain the CBN’s policy decisions to the public.
Referring to the CBN’s recognition as the Global Central Bank of the Year for 2026, he said the achievement reflected the collective efforts of many stakeholders.
“This is not an award for me; it’s an award for the whole country, and we all as Nigerians should be extremely proud of this award.”
Alex is a business journalist cum data enthusiast with the Pinnacle Daily. He can be reached via ealex@thepinnacleng.com, @ehime_alex on X