You did not need to be an expert in economics or finance to feel the intense inflationary episodes that hit Nigeria in 2023. The causes were not far-fetched. On President Bola Tinubu’s inaugural day in May 2023, he openly declared “fuel subsidy is gone,” putting an end to the decades-long petroleum subsidy regime introduced in the 1970s.

The immediate effect was a sudden hike in fuel prices—by as much as 200%—with ripple effects quickly felt by the average Nigerian purchasing food and other essentials in the market. Consumer prices soared, the currency’s purchasing power weakened, and the cost of living increased.

Early on, a friend forwarded me a WhatsApp voice note he received from his mother, a farmer, who simply explained the impact of removing the subsidy on food prices. In the voice note, she described how drivers transporting farm produce to market now had to buy fuel at much higher prices, which increased transportation cost. To maximize her profit, she had to factor this extra cost into the price of her produce. Simply put, every economic activity dependent on fuel for production and distribution became more expensive.

On the same day of the inauguration, the president said Nigeria's monetary policy needed “thorough house-cleaning”. By this, he referred to his administration's plan, through the Central Bank of Nigeria (CBN), to end the multiple foreign exchange (FX) rates that have created market distortions and arbitrage opportunities.

Before this time, there was a gap between the official and parallel market rates. Access to FX was a battle over influence, as only a few had access and could buy dollars at the official rate. These people who bought at the official rate sold dollars in the parallel market at expensive rates for profit.

Businesses and importers resorted to buying dollars at the parallel market because they could not get enough at the official rate. This situation reflected the uncertainty in Nigeria’s business ecosystem, discouraging potential investors. The FX unification marks a move from multiple rates toward a single, transparent rate driven by market demand and supply. For the first time in a long while, the true value of the naira is known, and FX is readily available, making it easier to do business.

In 2025, the Chairman of BUA Group, Mr. Abdul Samad Rabiu, shared his experiences before the CBN sanitised the FX market, noting that he would visit the CBN every two weeks to lobby for FX because his business's survival depended on it. This was the experience of many businesses.

The gains came at a cost. The unification policy led to the naira depreciating against the dollar. Because Nigeria depends heavily on imports, currency devaluation increased import and production costs. This catalysed a rise in consumer prices, compounding the harsh effects of fuel subsidy removal.

Since 2023, Nigerians have had to bear the burdens of these harsh policy reforms. Inflation skyrocketed, reaching levels not seen in decades. Past administrations have made similar decisions but backed down because of the hardship associated with the reforms. This raises the question: when is the right time for these reforms? Do we keep spending on fuel subsidy? Or do we keep creating an uncertain business environment for investors, as we did under the multiple FX regime?

Same CBN, Different Governors: Emefiele vs Cardoso’s Tactics

Amid this economic chaos, the CBN under the leadership of Yemi Cardoso, is currently using all available tools in its monetary policy arsenal to contain high inflation. These tools include the Monetary Policy Rate (MPR), Cash Reserve Ratio (CRR), liquidity ratio, and others. The assignment is clear: ensure monetary stability. For Yemi Cardoso, building long-term confidence in the economy comes before expansion. Investors want stability; restoring their trust is the only way to secure long-term investment.

This is a complete change of strategy from the previous apex bank leadership under Godwin Emefiele. Emefiele’s strategies focused on making special lending facilities and various development intervention programmes available to ensure affordable credit access (at lower interest rate) to priority sectors of the economy, including Small and Medium Enterprises (SMEs), agriculture, manufacturing, etc.

An example was the launch of the Anchor Borrowers’ Programme (ABP) in late 2015, a credit initiative of the CBN worth trillions of capital, to link crop and livestock farmers to processors. The aim was to boost agricultural productivity, reduce food imports by conserving FX through economic linkages, and create jobs by expanding access to credit, thereby enabling the expansion of operations from small- or medium-scale to large-scale.

However, seven years after the rollout of ABP loans, the CBN failed to recover approximately N630 billion from at least 4.8 million beneficiaries. Aside from the high loan default rate, the program was observed not to have achieved its objectives. Beneficiaries hoarded food products and patiently waited for scarcity before selling at an exorbitant price. This further worsened the food inflation rate during the program's existence. We cannot exclude the fault of Nigeria’s poor institutions, which lack effective enforcement.

Drawing on past lessons from unsuccessful tactics, it is fair for the central bank under Olayemi Cardoso to try something different. In February 2024, CBN raised the MPR by 400 basis points from 18.75 to 22.75 per cent, the largest recorded one-session jump in the bank’s MPR history and has since then maintained the rate between 27 and 27.5 per cent.

This decision aimed to tackle rising inflation and stabilise the economy. The MPR is the interest rate benchmark set by the central bank to lend to commercial banks. It is the cost of borrowing money from banks. Raising rates makes borrowing more expensive for individuals and businesses, leading to reduced demand and spending and, over time, generally reducing inflation.

Similar to the MPR, CBN also uses CRR to control the amount of money in circulation to slow inflation. CRR is the percentage of customer deposits that commercial banks are required to hold with the central bank, thereby reducing the amount available for lending and investment. Between May 2023 and November 2025, CBN maintained a high CRR rate of 32.5 to 45 per cent. With less money available for loans, borrowing becomes more stringent, consumer spending gradually declines, and this helps ease inflationary pressure.

Another major strategy the bank embarked on to restore investors' confidence in Nigeria's FX market was clearing the outstanding $7 billion FX backlog, which had built up over time. These are obligations owed for verified transactions for foreign investors, multinationals and corporations. The impacts of settling these obligations include contributing to naira stability, boosting FX inflows, and increasing foreign reserves.

Doing Things Differently

The year 2023 marked a significant turning point in Nigeria’s monetary policy framework. The continuous combination of these strategies by CBN, along with fiscal policies, has led to a considerable decline in inflation rates over time.

However, the CBN chose a long-term reformist strategy rather than short-term accommodation, which has demanded resilience from businesses and households but has also laid the groundwork for a more stable macroeconomic environment. Doing it differently and transparently is a major hallmark of the current CBN leadership, and it has translated into little observable difference.