The Governor of the Central Bank of Nigeria (CBN), Olayemi Cardoso, has attributed the current economic challenges to the poor management of the economy between 2015 and 2023, a period that spans the administration of former President Muhammadu Buhari. Cardoso emphasized that the current administration inherited a heavily distorted economy.
Speaking at a media briefing after the Monetary Policy Committee (MPC) meeting in Abuja, Cardoso stated that the new government was dealing with an excessive money supply situation. He pointed out that between 2015 and 2023, a significant influx of liquidity into the economy contributed to rising inflation and widespread economic hardship.
“In 2015, the money supply was around N19 trillion, but by 2023, it had ballooned to N54 trillion—a staggering increase,” said Cardoso. He further explained that much of this increase came through the CBN’s Ways and Means, leading to too much money chasing the same quantity of goods, which in turn fueled inflation. According to him, while the economy grew at a modest 1.2 percent, the money supply expanded by 12.6 percent during this period. He also noted that a combination of falling oil prices and exchange rate volatility exacerbated the situation.
The CBN governor pointed out that printing N35 trillion during Buhari’s tenure flooded the market with excess liquidity, aggravating inflation and economic challenges across the nation.
In response, the MPC unanimously voted to raise the benchmark Monetary Policy Rate (MPR) by 50 basis points to 27.25 percent, up from 26.75 percent, in an effort to curb inflation. This move is expected to raise borrowing costs for the manufacturing and real sectors of the economy.
Cardoso expressed confidence that recent CBN measures, including clearing the foreign exchange backlog and tightening interest rates, were beginning to restore investor confidence. “The numbers clearly show we are heading in the right direction,” he assured reporters.
The MPC also increased the Cash Reserve Ratio (CRR) by 50 basis points, raising it to 50 percent for Deposit Money Banks (DMBs) and to 16 percent for Merchant Banks. Meanwhile, the Liquidity Ratio (LR) was maintained at 30 percent.
Cardoso explained that the continued expansion of money supply necessitates tighter controls on liquidity and more robust efforts to address foreign exchange pressures. He acknowledged that while these monetary decisions might be tough, they are essential for reining in excess liquidity and controlling inflation.
“The measures we are taking are tough but necessary. We have no choice but to use these tools to ensure that we rein in excess liquidity and tackle high inflation,” he said.
The MPC highlighted that much more needs to be done to achieve price stability and called for closer collaboration with fiscal authorities, particularly in addressing rising energy costs. The Committee also raised concerns about the growing fiscal deficit but noted the government’s commitment to avoiding monetary financing through the CBN’s Ways and Means.
MPC Decisions Hinder Investment and Economic Growth – CPPE
In response to the MPC’s decisions, some stakeholders have expressed concerns. Dr. Muda Yusuf, Director and CEO of the Centre for the Promotion of Private Enterprise (CPPE), warned that the CBN’s continued tightening of monetary policy could harm investment and economic growth.
Yusuf described the new policy as detrimental to businesses, especially manufacturers and entrepreneurs, who are already struggling. “At a time when manufacturers and investors are desperate for relief, the CBN’s decision to tighten the monetary policy only makes things worse,” he said.
He argued that the new MPR of 27.25 percent, coupled with a 50 percent CRR and an asymmetric corridor of +500/-100, creates extremely difficult conditions for businesses to operate. He pointed out that key sectors of the economy, such as manufacturing, trade, ICT, and real estate, had already slowed significantly in the second quarter, and further tightening could deepen the economic downturn.
Yusuf added that the private sector should not bear the brunt of excess liquidity, which is largely public-sector driven. He called for a more targeted approach to liquidity management rather than further stifling business activity.
Dele Kelvin Oye, President of the Nigerian Association of Chambers of Commerce, Industry, Mines, and Agriculture (NACCIMA), echoed similar concerns, warning that higher borrowing costs could increase the strain on businesses without effectively addressing inflation or stabilizing the naira. He urged the CBN to engage with stakeholders and explore alternative solutions, such as targeted sector support and promoting local production, to balance economic growth with financial stability.
Both Yusuf and Oye called for a reassessment of the CBN’s monetary policies, emphasizing the need for innovative approaches to ensure sustainable economic growth in Nigeria.
