By Abubakar Yunusa
Olayemi Cardoso, governor of the Central Bank of Nigeria (CBN), has warned that excess liquidity remains a major risk to macroeconomic stability, saying the economy is not yet out of danger despite recent gains from reforms.
Speaking at the national economic council (NEC) meeting in Abuja,he said the large volumes of money still circulating within the financial system must be carefully managed to prevent renewed inflationary pressures.
“There is still a lot of liquidity within the system, and we’re going to manage this very carefully. We are not out of the woods yet,” the economist said.
The CBN governor said election-cycle spending had injected significant liquidity into the economy, adding that such inflows must be closely monitored to avoid undermining reforms that have helped stabilise prices and restored confidence.
“The election cycle, a typical election cycle, a lot of money has been pumped into the system. This has to be watched to ensure that it does not destabilise and challenge the very bold reforms which have brought about stability to the economy,” he added.
He also identified global trade tensions as an external risk factor that could worsen domestic pressures.
Cardoso cautioned that monetary policy alone cannot sustainably deliver low and stable inflation, especially in an economy where food supply shocks, high energy and logistics costs, infrastructure deficits, and informality weaken policy transmission.
“Monetary policy is a necessary but insufficient tool,” he said.
The central bank governor said lasting stability would require fiscal discipline, improved revenue mobilisation, efficient public spending, and stronger coordination between fiscal and monetary authorities.
He further said subnational governments play a critical role in managing liquidity and inflation, noting that states control about half of the federation revenue and significantly influence macroeconomic outcomes.
Cardoso also said the bank will do “whatever it takes” to safeguard the value of the naira, while strengthening the country’s external reserves.
He said price stability and the resilience of the external sector remain central to Nigeria’s growth strategy.
According to the economist, Nigeria’s net foreign reserves have risen to $49 billion — up from about $3 billion recorded in May 2023.
He said the CBN’s transition to inflation targeting, combined with prudent reserve management and banking sector recapitalisation, would support macroeconomic stability and the government’s ambition of building a $1 trillion economy.
“We will do whatever it is to ensure that we safeguard the value of the naira,” he said.
Cardoso said the CBN would maintain a disciplined interest rate path, while deepening domestic financial markets, strengthening financial stability, and promoting financial inclusion as a growth strategy.
Looking ahead to 2030, he said the CBN’s targets include achieving single-digit inflation and growing foreign exchange (FX) reserves driven by non-oil exports, foreign direct investment, and diaspora remittances.
He described remittances as increasingly important to Nigeria’s external sector, noting that the central bank has engaged with Nigerians in the diaspora to make it easier to send money home.
“Remittances have made a big difference, and they come from every state represented here,” he said.
Cardoso also urged state governments to align with national economic stability objectives by investing in infrastructure, supporting human capital development, managing debt sustainably, and partnering with the financial system to expand access to credit and deepen economic activity.
