Credibility as currency: Cardoso’s bet on Nigeria’s economic future
In the hushed auditorium of Lagos Business School, Nigeria’s Central Bank Governor Olayemi Cardoso delivered more than a policy address. The inaugural CBN Governor’s Lecture Series, titled “Next Generation Leadership in Monetary Policy and Nation Building”, represented something rarer in Nigerian governance: an institution acknowledging that its survival depends not merely on technical precision but on rebuilding shattered trust. For a central bank often perceived as an opaque fortress, the very existence of this public dialogue signals a subtle but significant shift. When Cardoso assumed leadership in September 2023, he inherited what economists politely term “formidable headwinds”—inflation spiralling toward 35 percent, external reserves strained, investor confidence shattered, and a $7 billion foreign exchange backlog symbolising years of monetary indiscipline. Two years later, his address was less statistical recitation than philosophical framing: from crisis to “developmental inflection point”. The question is whether this narrative represents a genuine transformation or merely a sophisticated performance.
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The credibility wager
Cardoso’s central thesis, that credibility is the central bank’s “most valuable currency”, is neither novel nor profound as a monetary theory. What makes it significant is the implementation context. Nigeria’s monetary authority had spent the previous half-decade financing fiscal deficits beyond statutory limits, maintaining multiple exchange rate windows breeding arbitrage and corruption, and accumulating external obligations it couldn’t honour. The institution had exhausted its reputational capital. His recounting of clearing the $7 billion forex backlog illustrates the challenge. He admitted candidly, “I had no idea how I was going to do it, but I just felt it was not something to be negotiated.” This wasn’t bravado but recognition that central banks operate on trust, and unpaid obligations destroy that trust absolutely. The decision to commission forensic audits and clear verifiable commitments, even for transactions predating his tenure, cost Nigeria dearly in the short term but signalled something international markets had stopped expecting: institutional integrity transcending political cycles.
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The results provide evidence for his case. External reserves have risen to $42 billion. Capital flows are rebounding. Sovereign credit default swap spreads have tightened significantly—the market’s real-time verdict on default probability. Fitch upgraded Nigeria to B in April 2025; Moody’s followed with B3 in May. These aren’t transformative ratings, but trajectory matters. Each notch reduces borrowing costs by approximately 50-75 basis points, translating to hundreds of millions in annual savings.
Orthodox medicine: Bitter but necessary
Cardoso’s monetary tightening has been aggressive—over 800 basis points in cumulative rate hikes, taking the benchmark to 27 percent before a marginal 50 basis point cut in the recent MPC meeting. Critics decry the pain for credit-dependent businesses and households. His response, both in prepared remarks and the fireside chat, was unflinching: stability first, growth second. This sequencing is economically sound but politically costly. High real interest rates constrain investment and consumption in the near term. Yet the alternative—allowing inflation to persist at 20-35 percent—constitutes a far more pernicious tax, disproportionately harming the poor while creating macroeconomic instability that deters investment entirely. Cardoso’s explicit commitment to “single-digit inflation in the medium term” sets a clear anchor, allowing businesses to plan and investors to commit. The disinflationary progress, while incomplete, is measurable. Headline inflation has moderated from peaks near 35 percent to approximately 20 percent—still unacceptably high, but the trajectory is encouraging. More importantly, second-quarter GDP growth of 4.22 percent suggests the economy is weathering the adjustment better than many feared. This reflects the reality that stability-driven confidence can partially offset tightening-induced headwinds.
“While commitment to the “willing buyer, willing seller” forex regime is laudable, its sustainability hinges on continuous foreign inflows—fickle flows depending on broader perceptions of political and policy stability beyond the CBN’s walls.”
The Foreign Exchange revolution
Perhaps Cardoso’s most consequential reform has been exchange rate unification. The multiple-window system he inherited was, in economic terms, a massive implicit subsidy scheme benefiting those with access to “official” rates while penalising everyone else. It bred corruption, depleted reserves through arbitrage, and made rational economic calculation impossible when different agents faced wildly different effective prices. The unified “willing buyer, willing seller” framework represents textbook market-based reform. The initial adjustment was severe—the naira depreciated from approximately ₦460 to over ₦1,400 per dollar. Yet this wasn’t devaluation; it was price discovery. The previous rate was a fiction sustained by rationing and favouritism. The current rate, while volatile, reflects actual market clearing. The practical implications have been transformative. As Cardoso noted with evident satisfaction, “You won’t have to know anybody to get your business done.” Nigerians can now use naira debit cards internationally—a seemingly mundane detail representing profound institutional change. The ₦7.3 trillion in annual arbitrage losses eliminated by unification exceeds the annual budget of several federal ministries. That capital, previously captured by rent-seekers, now flows to productive uses.
The youth demographic and digital future
Cardoso’s emphasis on next-generation leadership constitutes a strategic, almost existential, calculation. With Nigeria’s median age at 18 years and over half the population under 30, the country’s economic future hinges on its youth. The CBN appears to be betting that by engaging this demographic early, it can foster a deeper understanding of—and crucially, longer-term patience for—often painful monetary policy decisions. The governor’s candid discussion of cryptocurrency regulation during Q&A was particularly revealing. Nigeria’s estimated position as the second-largest crypto trading market globally reflects both decentralised finance’s appeal and conventional systems’ failure. The CBN’s collaboration with the Securities and Exchange Commission on regulatory frameworks acknowledges what many central banks resist: digital assets aren’t disappearing, and ignoring them doesn’t reduce associated risks. On digitalisation more broadly, the CBN has implemented paperless approval systems, established regulatory sandboxes for fintech innovation, and launched the non-resident Naira account platform, enabling diaspora participation. Financial inclusion rates have climbed from 56 percent in 2020 to 64 percent in 2025—progress that still leaves 60 million adults excluded but demonstrates directional movement.
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The unspoken constraints
Yet for all the talk of transparency and digital futures, Cardoso’s most critical challenge remains largely unaddressed in public forums: the structural constraints of the Nigerian economy. Monetary policy can create a stability platform, but it cannot single-handedly build the stage. The CBN’s tightening measures have cooled demand, but food inflation remains stubbornly high, driven by security failures in farming heartlands and crumbling infrastructure. Nigeria’s revenue mobilisation failure—tax-to-GDP ratios near 6 percent against 15-20 percent African comparators—limits fiscal capacity and pressures monetary policy to compensate. The ongoing bank recapitalisation, while prudent, creates near-term financial sector uncertainty. Most fundamentally, monetary stability cannot substitute for broader structural reforms: infrastructure development, human capital investment, and economic diversification. The CBN’s success is ultimately tethered to fiscal reforms and structural changes outside its direct control. While commitment to the “willing buyer, willing seller” forex regime is laudable, its sustainability hinges on continuous foreign inflows—fickle flows depending on broader perceptions of political and policy stability beyond the CBN’s walls.
The reputation paradox
One of Cardoso’s most pointed observations addressed a peculiarly Nigerian challenge: the tendency toward excessive self-criticism eroding national credibility. He recounted the National Theatre restoration (a CBN-supported project) as emblematic of rebuilding national pride. The economic logic is sound—country risk premiums contain subjective components. When domestic voices consistently project crisis narratives, international investors price accordingly. This creates a paradox. Accountability demands a critical assessment of government performance. Yet when legitimate criticism morphs into generalised cynicism—when every reform is dismissed as inadequate and every achievement downplayed—it becomes self-fulfilling. International investors, reading Nigerian media and social discourse, perceive chaos even when underlying realities improve. Cardoso’s prescription—”constructive criticism” balanced against acknowledgement of progress—is easier stated than practised. Nigerians face genuine hardships: purchasing power erosion, unemployment, and insecurity. Dismissing these experiences as mere perception problems would be economically illiterate and morally bankrupt. Yet the governor’s point stands: reputation affects capital costs, and capital costs affect development capacity.
Institutional memory and the succession test
One overlooked aspect of Cardoso’s lecture series is its contribution to institutional continuity. By establishing an annual lecture series, publishing detailed policy communications, and committing to transparency (including publishing audited financial statements for the first time in years), Cardoso is building institutional memory. Future governors will find it harder to deviate from orthodox practice when current practice is extensively documented and publicly defended. This matters because Nigeria’s monetary policy credibility remains fragile. Two years of improvement can be undone by a single year of backsliding. The test will come when Cardoso’s term expires and succession begins. Will the next governor maintain the orthodox stance, or will political pressures toward monetary financing resume? Nigeria’s institutional history counsels caution.
The verdict: Foundation laid, structure unbuilt
Cardoso’s lecture was a performance of a central banker attempting to do the right thing. He is correctly focusing on modern central banking pillars: credibility, transparency, and communication. His narrative of a turning point is cautiously optimistic and, based on recent data, not entirely unwarranted. Two years into his tenure, Nigeria’s monetary policy credibility has been substantially restored. Inflation is declining, reserves are recovering, the exchange rate is functioning, and investor interest is returning. These are genuine achievements worthy of recognition. BlackRock’s recent Nigeria visit reflects shifting institutional investor sentiment—Nigeria is on “watch lists” again after years of exclusion.
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Yet achievements must be contextualised. Nigeria remains a lower-middle-income country with per capita income stagnating in real terms for a decade. Monetary stability is necessary for sustained prosperity but insufficient alone. The hard work of structural transformation—diversifying the productive base, improving infrastructure, enhancing human capital—remains largely unaddressed. Cardoso’s metaphor of stability as “foundation” rather than “end” captures this reality. Foundations matter immensely—buildings collapse without them. But foundations alone don’t constitute buildings. Nigeria’s economic structure—what gets built on this stabilised foundation—depends on coordinated reforms across fiscal policy, infrastructure investment, regulatory quality, and governance.
The true test of this new dialogue will be its endurance. Is this a fleeting charm offensive or the foundation of a more resilient institution? The CBN has lit a candle of confidence but navigates a room still filled with strong winds of structural economic problems. The next generation in the audience was listening intently. They, and the nation, now wait to see if the stability Cardoso promises becomes the foundation upon which a truly diversified and productive economy can be built. The governor’s parting words to students—”Nigeria’s story is still being written, and it is you, the next generation, who will hold the pen, or should I say the digital device”—are simultaneously inspiring and daunting. The podium has been set; the real work, for the entire central bank and government, remains. For now, Nigeria’s central bank has given the country something it desperately lacked: a credible monetary anchor. Whether other institutions build productively on that foundation, or whether monetary stability becomes an isolated achievement in an otherwise unreformed economy, will define not just Cardoso’s legacy but the nation’s economic future.
Dr. Oluyemi Adeosun, Chief Economist, BusinessDay Media
