How CBN’s Reforms, Monetary Policy Decisions Support Reserves, Tackle Inflation

James Emejo

Nigeria’s inflation rate has continued to cool, falling to 16.05 per cent in October from 18.02 per cent in September 2025. The inflation rate drop was largely driven by the monetary policy decisions and positive outcome of key reforms instituted by the Central Bank of Nigeria (CBN), which triggered continued FX stability, a spike in foreign reserves to $46.7 billion. CBN governor, Olayemi Cardoso, highlighted the positive impact of monetary policy decisions, including making the naira more competitive at international markets, and improving the investment climate for global investors.

The Central Bank of Nigeria (CBN) says structural reforms are beginning to filter through to the broader economy, helping to stabilise the naira, ease lending rates and moderate inflation numbers.

For the bank, the recent monetary policy actions reflect a deliberate strategy to restore macroeconomic stability after years of fiscal and external pressures.

These developments reflect the commitment and focus of the Bank’s leadership in restoring stability to the financial system, adding that lower lending rates are emerging as one of the tangible outcomes of the CBN’s policy trajectory.

The CBN said alignment of fiscal and monetary policies is indispensable at a time when technological innovation and digital finance are rapidly transforming the financial landscape.

The Monetary Policy Committee (MPC) of the Central Bank of Nigeria (CBN) retained the benchmark interest rate at 27 per cent during the last meeting in Abuja.

The central bank, however, adjusted the standing facility corridor around the MPR at +50/-450 basis points, and retain the Cash Reserve Requirement (CRR) for Deposit Money Banks (DMBs) at 45 per cent, merchant banks at 16 per cent, and 75 per cent for non-TSA public sector deposits as well as kept the Liquidity Ratio unchanged at 30 per cent.

Addressing journalists after the two-day meeting of the Monetary Policy Committee (MPC) – the last for 2025 – CBN Governor, Mr. Olayemi Cardoso, said the committee’s decision was underpinned by the need to sustain the progress made so far towards achieving low and stable inflation.

The MPC also reaffirmed its commitment to a data-driven assessment of developments and outlook to guide future policy decisions.

Already, the National Bureau of Statistics (NBS) said that in October 2025, Inflation reduced to 16.05 per cent from 18.02 per cent in September 2025. This was contained in the Consumer Price Index (CPI) Report of October.

NBS said, “In October 2025, the Headline inflation rate eased to 16.05 per cent relative to the September 2025 headline inflation rate of 18.02 per cent.”

On a year-on-year basis, NBS said the Headline inflation rate was 17.82 per cent lower than the rate recorded in October 2024 (33.88 per cent).

The report said this shows that the Headline inflation rate (year-on-year basis) decreased in October 2025 compared to the same month in the preceding year (i.e., October 2024), though with a different base year, November 2009 = 100.

NBS added, “On a month-on-month basis, the Headline inflation rate in October 2025 was 0.93 per cent, which was 0.21 per cent higher than the rate recorded in September 2025 (0.72 per cent).

“This means that in October 2025, the rate of increase in the average price level was higher than the rate of increase in the average price level in September 2025.”

The ongoing moderation in the inflation rate, rising competitiveness of the naira and growth in foreign reserves all point to a positive phase in Nigeria’s economic position.

The International Monetary Fund (IMF) relied on these indicators to project a 3.9 per cent growth for Nigeria in 2025, as well as expanded stability in the FX markets.

The FX reforms, instituted by the Olayemi Cardoso-led Central Bank of Nigeria (CBN), new policies instituted by the Federal Government to boost local production, reduce forex demand pressure, and lessen domestic prices have been instrumental to macroeconomic stability.

The expectations are that the apex bank sustains the forex reforms while the fiscal authority strengthens efforts at enhancing FX earnings, especially from gas, oil and non-oil exports.

State of the Naira

The naira has achieved a notable milestone, strengthening by 3.5 per cent against the U.S. dollar over the past ten months, reaching N1,450/$ at the parallel market. This recovery, though modest, signals a crucial shift, driven by coordinated adjustments to fiscal and monetary policies by the Federal Ministry of Finance and the Central Bank of Nigeria (CBN).

The start of the year saw the Naira trading at around N1,555/$. However, a brief period of instability saw the rate slip to a high of N1,597/$ by the end of April. The subsequent six months were marked by intense policy intervention. The naira briefly firmed up at N1,475/$ in October 2025 at the official market before settling at N1,500/$ at the parallel market yesterday, marking a 3.5 per cent gain from the January starting point.

CBN Governor Yemi Cardoso says naira is turning the corner, and becoming more competitive in the international markets.

He said Nigeria’s economy has been fully restructured and is now resilient, with huge buffers against global risks.

He spoke during the Intergovernmental Group of Twenty-Four (G-24) press briefing at the ongoing IMF/World Bank Annual Meetings in Washington DC, US.

Cardoso, who is the leader of the Nigeria delegation at the meetings, said the naira, has equally emerged as a competitive currency, with the economy witnessing positive trade balances and large businesses moving from imports to export of locally produced goods and commodities.

According to him, the positive economic indicators have combined to create resilient and strong buffers, keeping the economy in great shapes.

Speaking on the impact of the trade tariffs on the domestic economy, the CBN boss, said the tariffs are less of problems for the country.

“And for us again, oil is basically the only commodity that was so exposed to the tariffs, and the impact of that was relatively modest. We now have a more competitive currency with the results that, for once, we have a situation where we have a positive balance of trade surplus, and we expect it to be six per cent in GDP for some time,” he said.

“So basically, what is happening is a complete restructuring of the economy, where we are encouraging people to go into domestic production, and, of course, discouraging imports,” he added.

“And I think we were very fortunate, because a lot of the things that were needed to have been done, we did them much earlier, and as a result of that, we’re able to create resilience and buffers against potential shocks,” he stated.

Views from other stakeholders

The Director-General, the West African Institute for Financial and Economic Management (WAIFEM) Dr. Baba Musa, has called on government to ensure that 3.9 per cent growth for Nigeria in 2025 translate to decent jobs, rising incomes, improved productivity, and broader social welfare.

In his report presented at the recently concluded 2025 IMF/World Bank Annual Meetings in Washington DC, titled: “Nigeria’s Economic Outlook at a Turning Point”, he said as Nigeria moves further into 2025, Nigeria’s economic story is one of resilience, renewal, and strategic recalibration.

Musa, who is also the President, Nigerian Economic Society, said Nigeria’s economic trajectory is increasingly encouraging with the International Monetary Fund (IMF) projecting real Gross Domestic Product (GDP) growth of 3.9 per cent in 2025, up from 3.5 per cent in 2024, with further acceleration to 4.2 per cent in 2026.

Musa said Nigeria in 2025 is at a critical inflection point, cautiously optimistic yet structurally fragile.

“Gains in growth, inflation moderation, and investment confidence mark important progress, but the work is far from complete. To sustain the recovery, Nigeria must maintain macroeconomic stability, deepen structural reforms, and ensure that growth translates into tangible improvements for citizens. Achieving this requires collaboration among government, private sector, civil society, and development partners,” he said.

According to him, by committing to policy consistency, human capital investment, and inclusive growth, Nigeria can consolidate its recovery and emerge as a more competitive, resilient, and equitable economy in the years ahead.

“Globally, economies are grappling with slowing growth, projected at 2.7% in 2025 by the IMF for advanced economies, and heightened geopolitical risks that affect trade and investment. Against this backdrop, Nigeria has demonstrated remarkable determination. Domestically, inflationary pressures, infrastructure deficits, and unemployment persist, yet they now represent policy frontiers rather than defining constraints,” he said.

Musa said recent policy measures, ranging from fiscal consolidation to targeted monetary adjustments, have laid the groundwork for a sustainable growth trajectory.

“The real test, however, lies not only in achieving stability but in ensuring that it translates into tangible socio-economic outcomes: decent jobs, rising incomes, improved productivity, and broader social welfare. If Nigeria deepens reforms, invests strategically in human capital, and leverages its structural advantages, the country can achieve not only recovery but inclusive and durable economic transformation,” he said.

He said the growth for Nigeria is underpinned by stronger oil production following operational improvements and policy reforms in the petroleum sector.

“Recovery in services, particularly telecommunications, financial services, and transport, reflecting resilient domestic demand. Improved agricultural output, thanks to favorable weather patterns and government support for mechanization and inputs,” he said.

He said the recent GDP rebasing has also given a more accurate reflection of the economy, capturing growth in high-potential sectors such as digital services, modular refining, and the creative industries. This expanded view highlights opportunities for job creation, innovation, and revenue generation that were previously underappreciated.

According to him, inflation remains elevated but is gradually moderating.  “Headline inflation declined to 18.02 per cent in September 2025, down from 20.12 per cent in August, reflecting improved food supply, seasonal harvests, and targeted interventions in the energy market. The Central Bank of Nigeria’s interest rate cut, the first since 2020, signals a nuanced policy shift: a deliberate effort to balance price stability with growth and employment objectives. This approach is consistent with modern macroeconomic management, where inflation targeting is tempered by the need to stimulate investment and production in key sectors,” he said.

“Investor sentiment is improving, illustrated by Shell’s approval of the HI Offshore Gas Project, expected to supply 350 million standard cubic feet of gas per day to Nigeria LNG. Economically, such projects deliver multiplier effects: they stimulate domestic suppliers, create high-skill and semi-skilled jobs, and strengthen Nigeria’s position as a reliable energy hub in Africa. They also enhance balance of payments stability, by promoting export-oriented production,” he said.

Other steps to support economy

The CBN under Cardoso is cultivating multiple FX sources to increase dollar inflows, boost dollar access to manufacturers and retail end users.

From moves to improve diaspora remittances through new product development, the granting licenses to new International Money Transfer Operators (IMTOs), implementing a willing buyer-willing seller FX model, and enabling timely access to naira liquidity for IMTOs, the apex bank has simplified dollar-inflow channels for authorized dealers and other players in the value chain.