Nigeria’s foreign reserves have surpassed $40 billion for the first time in nearly three years, signaling a significant step in the country’s economic recovery.
Central Bank Governor Olayemi Cardoso credited this milestone to major reforms aimed at strengthening the financial sector.
Speaking at the inaugural Conference on Emerging Market Economies in Riyadh, he discussed these developments with Talal Al-Humond, Assistant Governor for Monetary Affairs at the Saudi Arabian Central Bank (SAMA).
According to a statement from the Central Bank of Nigeria (CBN), the reserves are now at their highest level in almost three years.
Key reforms driving this increase include the introduction of an electronic matching system to improve transparency in the foreign exchange market and the establishment of a foreign exchange code of ethics.
This code, signed by all Nigerian banks, ensures strict adherence to market regulations, bolstering investor confidence and stability in the financial sector.
At the conference—organized by the Saudi Ministry of Finance and the International Monetary Fund (IMF) Regional Office—Cardoso emphasized the need for stronger economic ties between Nigeria and the Middle East.
He highlighted how Nigeria could benefit from Saudi Arabia’s expertise in infrastructure development, economic diversification, and tourism investments.
In his efforts to strengthen Nigeria’s economic standing, Cardoso reiterated his commitment to engaging with the Nigerian diaspora in the Middle East.
He underscored the importance of increasing remittance flows from Nigerians abroad, noting that these contributions would play a vital role in reinforcing the country’s financial stability.
Cardoso stated:
> “The CBN will continue implementing policies that enhance macroeconomic stability, promote private sector growth, and create high-quality jobs.”
During a panel discussion moderated by Jihad Azour, Director of the IMF’s Middle East and Central Asia Department, Cardoso addressed key financial reforms in Nigeria.
He noted that Nigeria had previously struggled with a substantial disparity—sometimes as wide as 60%—between the official and parallel market exchange rates.
However, due to a consistent policy framework, increased market confidence, and enhanced transparency in forex trading, this gap has now been reduced to approximately 4-5%.
Cardoso acknowledged that Nigeria had faced significant economic challenges, including capital flight, multiple exchange rate systems, currency depreciation, high inflation, and a backlog of foreign exchange transactions.
These issues had weakened investor confidence and contributed to financial instability.
Upon assuming office, Cardoso prioritized clearing the backlog of forex transactions and reinforcing Nigeria’s commitment to economic stability.
To tackle inflation and maintain macroeconomic discipline, the CBN adopted a tight monetary policy stance, increasing interest rates by 850 basis points over the past year.
The bank also moved away from quasi-fiscal interventions, which had previously caused market distortions, instead favoring a more conventional monetary policy approach.
Cardoso highlighted the financial burden of petrol subsidies and inefficiencies in the foreign exchange market, estimating that these factors had cost Nigeria nearly 6% of its Gross Domestic Product (GDP) annually.
To strengthen Nigeria’s financial system, the CBN mandated banks to increase their capital base to enhance resilience against potential economic shocks.
He noted that this recapitalization initiative has yielded positive outcomes, ensuring that the banking sector remains stable and capable of supporting economic growth.
Regarding financial inclusion, Cardoso pointed out that Nigeria’s current rate stands at 74% but stressed the need for greater efforts to expand financial access, particularly in underserved areas.
He emphasized that digital solutions, such as mobile money services and technology-driven initiatives—especially those targeting women—could significantly bridge the financial inclusion gap.
Cardoso also explained that Nigeria’s monetary policies are tailored to its specific economic conditions rather than simply following global trends.
He noted that while some international financial analysts were initially skeptical of Nigeria’s tightening stance, recent developments have validated the country’s approach.
Many financial experts now recognize the effectiveness of these measures.
Al-Humond assured Cardoso that the Saudi Arabian Central Bank is open to collaboration with the CBN to pursue mutually beneficial economic goals.
