The Central Bank of Nigeria (CBN) has defended its tight liquidity stance, saying that the foreign exchange (FX) rate of the Naira to the Dollar is now market-driven, more open and transparent.
CBN Governor Olayemi Cardoso, who made this known while addressing journalists at the end of the 303rd Monetary Policy Committee (MPC) meeting held in Abuja, said the forex market no longer needs CBN’s constant intervention.
Cardoso attributed the forex market turnaround to FX reforms, stronger regulatory coordination and bank recapitalisation efforts.
According to him, the foreign exchange (FX) market has shifted from a heavily managed system to one largely driven by willing buyers and sellers.
He cited the Electronic Foreign Exchange Matching System (EF-EMS) trading platform that provides “open and very transparent” visibility of who is buying and who is selling, and said the result has been dramatically reduced rate differentials between the official FX and parallel market rate.
“Differentials in foreign exchange rates are now down to about 2%,” he said, contrasting that with spreads of roughly 60% when market reform began.
The CBN also told investors that average daily turnover in the FX market is about half a million dollars — with the Bank often not participating with interventions — a signal, according to the Governor, of genuine market depth.
“We now have a market that operates openly and transparently… where people can buy and sell freely without depending on the Central Bank,” Cardoso said, adding that Nigerians now travel and transact internationally with minimal concern over forex access.
Cardoso said the FX market is now functioning on a willing buyer–willing seller basis, backed by the EF-EMS platform, which ensures transparency and visibility of trades.
The CBN introduced EF-EMS to conduct foreign exchange (FX) transactions in the Nigerian foreign exchange market to automate the matching of buy and sell orders, increasing market transparency and efficiency, and thereby reducing speculative activities while allowing for market-driven exchange rates.
The MPC retained the benchmark interest rate at 27%, extending its pause on monetary tightening. Cardoso said, “All the 12 members of the Committee were present. The MPC decided by a majority vote to maintain the monetary policy stance,” indicating that members were not yet convinced that current economic conditions warranted another reduction.
Cardoso highlighted Nigeria’s recent removal from the FATF grey list as a critical indicator of improved inter-agency cooperation among the CBN, NFIU, SEC and security agencies.
He noted that the exit sends a strong positive signal to global investors and foreign correspondent banks, reducing caution in dealings with Nigerian institutions.
“It promotes financial system stability and leads to more competitive pricing for remittances and trade finance,” he said. “But the bigger challenge is sustaining the achievement — because once stability is lost, the consequences are severe.”
Cardoso emphasized that a disciplined approach to monetary policy, combined with avoidance of “policy flip-flops,” has given market players better forward visibility and planning ability. He underscored the importance of continued collaboration between fiscal and monetary authorities, particularly as Nigeria moves toward an inflation-targeting framework.
He disclosed that the permanent secretary of the Ministry of Finance now sits on the MPC to deepen policy alignment.
