...Reforms Restore Confidence in the Naira, Strengthen Financial System
Nigeria’s ongoing monetary and foreign exchange reforms are beginning to restore confidence in the naira and reinforce the country’s financial system, according to the governor of the Central Bank of Nigeria (CBN), Olayemi Cardoso.
Speaking at the Annual Distinguished Alumni Lecture organised by the St. Gregory’s College Old Boys Association in Lagos, Cardoso said the era of persistent naira devaluation is coming to an end as the country implements policies designed to rebuild investor confidence and strengthen financial institutions.
The event formed part of the Founders’ Day celebration of St. Gregory’s College.
According to the CBN governor, the improvements currently being witnessed in the financial system are the outcome of deliberate policy decisions aimed at restoring credibility in Nigeria’s monetary and foreign exchange frameworks.
“These developments are not accidental,” Cardoso said. “They are the result of deliberate efforts to rebuild trust and strengthen the confidence of both domestic and international investors.”
Building a Stronger Financial System
Cardoso stressed that strengthening the capital base of banks and improving transparency in financial markets are critical steps toward building a resilient economy capable of withstanding global shocks.
He noted that investors are more likely to commit funds to markets where governance is strong, rules are clear and information is equally accessible.
“Investors do not place their money in markets where transparency is absent or where a privileged few possess information unavailable to others,” he said. “Confidence thrives in environments defined by fairness, discipline and credible institutions.”
He added that the reforms introduced in recent years have helped restore pride in the national currency while also strengthening confidence in the country’s financial system.
Inflation Control Remains Central
The CBN governor reiterated that restoring price stability remains a top priority for the apex bank. According to him, the long-term goal is to bring inflation down to single digits, although achieving that objective will take time.
Cardoso acknowledged that external shocks and global economic developments could continue to influence inflationary pressures in Nigeria, but insisted that controlling rising prices remains critical for protecting citizens, particularly the most vulnerable.
“Our goal remains to bring inflation down to single digits. This cannot happen overnight,” he said. “External shocks will continue to occur and global developments will always have some impact.”
He warned that inflation functions like a hidden tax on society, disproportionately affecting low-income households.
“That is why restoring price stability remains a central objective,” he added.
Foreign Exchange Market Reforms
Cardoso pointed to reforms in Nigeria’s foreign exchange market as one of the most significant steps taken to improve transparency and efficiency in the financial system.
A key measure was the elimination of the multiple exchange rate system that previously allowed a limited number of market participants to access foreign currency at preferential rates.
While some critics argue that the naira appears weaker today than before the reforms, Cardoso maintained that the difference lies in accessibility and transparency.
“When the official rate was lower, how many people could actually access foreign exchange at that rate?” he asked. “The answer, in most cases, was very few.”
He explained that the current system allows foreign exchange to be accessed through formal channels, making the market more transparent and accessible.
As an example, he noted that many Nigerians travelling abroad can now use their naira cards directly instead of sourcing foreign currency through informal markets—a development he described as a significant improvement compared with previous years when access to forex was extremely limited.
Narrowing Gap Between Official and Parallel Markets
The CBN governor also revealed that the gap between official and parallel market exchange rates has narrowed significantly in recent years.
According to him, the premium between the two markets has dropped from about 50 percent in 2022 to less than two percent on average in 2025, reflecting improved liquidity and greater efficiency in the forex market.
He explained that there was a period when the Central Bank had to intervene frequently to keep the market functioning.
“There was a time when the Central Bank had to intervene constantly just to keep the market functioning,” he said. “Without those interventions, little activity occurred.”
Today, he noted, the market operates more independently, with the apex bank stepping in only when necessary.
Rising Capital Inflows and External Reserves
Cardoso disclosed that Nigeria has recorded nearly a 200 percent increase in capital inflows between 2023 and 2025, a development he attributed to improved investor confidence and clearer policy direction.
He also noted that the country’s external reserves recently surpassed $50 billion—the highest level recorded in more than 13 years.
These indicators, he said, reflect growing international confidence in Nigeria’s economic reforms and financial system.
Preparing for Global Uncertainty
Despite the progress recorded, Cardoso cautioned that the global economy remains uncertain due to geopolitical tensions and developments involving countries such as the United States, Israel and Iran.
Such tensions, he said, could disrupt supply chains, drive up energy prices and increase risk aversion among global investors.
However, he maintained that Nigeria is now better positioned to withstand external shocks as a result of the macroeconomic reforms implemented over the past two years.
“Storms may come, but our house will stand firm,” he said.
Fintech and the Future of Finance
Cardoso also highlighted the growing role of technology and innovation in shaping the future of Nigeria’s financial sector.
He noted that the country now hosts one of the world’s most dynamic fintech ecosystems, with digital payments, mobile banking platforms and financial technology solutions expanding financial inclusion for millions of previously underserved Nigerians.
According to him, young entrepreneurs are increasingly building technology-driven businesses that are transforming how financial services are delivered.
These innovations, he said, are enabling faster payments, more efficient lending and broader access to investment opportunities.
To ensure sustainable growth in the sector, the CBN has begun establishing clear regulatory guidelines for fintech operators, including frameworks covering Know-Your-Customer compliance and operational risk management.
“These frameworks are not barriers to innovation,” Cardoso said. “They are the infrastructure that allows innovation to scale sustainably.”
He added that just as capital buffers protect banks from financial shocks, well-designed regulatory frameworks help safeguard the integrity of the entire financial ecosystem.
By combining innovation with discipline and opportunity with responsibility, Cardoso concluded, Nigeria’s financial system can continue to evolve and remain resilient in the digital age.