Olayemi Cardoso’s First Year as CBN Governor: Achievements, Challenges
Donatus Eleko
Today marks exactly one year since Mr. Olayemi Cardoso assumed office as the Governor of the Central Bank of Nigeria (CBN). In the last 365 days, Cardoso has faced the daunting task of steering the nation’s monetary policy amidst a challenging economic landscape.
Under the one-year stewardship of Cardoso, the CBN has implemented a series of ground-breaking measures aimed at enhancing market transparency, improving financial stability, fostering a more secure investment environment, and shifting towards a market-driven exchange rate regime, to restore confidence and stabilise the economy.
From enhancing market transparency through restricting unearned income distribution to facilitating Nigeria’s delisting from the FATF Grey List, the CBN has demonstrated a steadfast commitment to strengthening the financial system. The introduction of new guidelines for dormant accounts, the suspension of processing fees to encourage cash deposits, and the advanced use of Early Warning Systems further underscores the central bank’s dedication to promoting stability and trust within the financial sector.
Undoubtedly, his first year in office has been marked by some achievements and challenges that have tested his leadership and the institution’s resilience. Some of these challenges included a forex liquidity crisis exacerbated by limited dollar inflows and a volatile naira. However, owing to reform measures, the CBN recently reported a significant increase in remittance inflows, which peaked at $553 million in July 2024. The all-time high performance represented 130 percent increase from the corresponding period in 2023. In a statement, CBN’s acting Director, Corporate Communications Department, Mrs. Hakama Sidi Ali, said the figure represented the highest monthly total inflows on record and reflected ongoing efforts by CBN to enhance liquidity in the country’s foreign exchange (FX) market.
Also, the CBN under Cardoso has recorded some progress in its fight against the soaring inflation rate in the country that had plagued the nation for years. By aggressively tightening monetary policy, the CBN aimed to curb excessive money supply, a key driver of inflation. The Consumer Price Index (CPI), which measures the rate of change in prices of goods and commodities, eased to 32.15 percent in August 2024, compared to 33.40 percent it was in July 2024. Inflation stood at 26 percent as of September 2023. Nigeria has faced severe inflationary pressure in the past year, due to the removal of petrol subsidy and a raft of measures adopted by the federal government, which the Cardoso-led central bank has deployed all monetary policy tools to fight.
Cardoso made inflation tackling his paramount mission and the essential path to achieving sustainable economic growth in the mid to long term as well as improving the standard of living of ordinary Nigerians.
With that, in the last one year, the CBN adopted an aggressive monetary policy stance that involved increasing interest rates. This, in theory, reduced spending and investment, thereby cooling down demand in the economy. Additionally, the bank has been implementing measures to mop up excess liquidity from the system, further tightening financial conditions. Precisely, in its fourth consecutive hike since February, the CBN recently increased the MPR by 50 basis points to 26.75 percent in July, from 26.25 percent.
The implementation of an Inflation-Targeting (IT) framework by Cardoso, aims to stabilise price levels, reduce currency volatility, and foster sustainable economic growth.
Under the current management, the CBN has implemented policies that foster confidence in the Nigerian economy, attracting foreign investors and encouraging business growth. There have been enhanced communication and strategic actions that have helped in minimising economic uncertainties and building trust among investors and the public.
Additionally, the Cardoso-led CBN has streamlined the forex market into a single framework, enhancing liquidity and reducing market distortions, cleared a $7 billion backlog of valid forex, reduced forex volatility, and increased external reserves to $37.9 billion as of July 2024, up from $33.6 billion in October 2023.
There has also been a visible improved monetary-fiscal coordination as the Fiscal and Monetary Policy Coordination Framework (FMPCF) was developed to improve synergy between monetary and fiscal policies, ensuring better economic management. The Financial Services Regulation Coordinating Committee (FSRCC) has also been strengthened with regular inter-agency meetings and collaborations on issues such as cryptocurrency frameworks and infrastructure financing. The Carbon Market Framework was also developed with the Nigerian Climate Change Council to attract sustainable finance and foreign investment.
Furthermore, in the last one year, the central bank has improved the communication of monetary policy decisions through strategic planning and engagement with media and stakeholders introduced podcasts, and enhanced social media presence to provide timely updates and engage the public effectively. It has also introduced big data for more informed monetary policy decisions through tools like Dynamic Integrated Analytic Modeling (DIAMoND) and Macro Diagnostic Framework and maintained high forecast accuracy and developed news-based indices for policy uncertainty.
To improve service delivery, it has also invested in capacity-building programmes to enhance staff competencies in economic analysis and policy-making.
Other Key Achievements in Past Year
Under Cardoso, in the last one year, one new bank was approved as a non-operating financial holding company; another transitioned from a merchant to a national commercial bank. Two banks received approval-in-principles (AIPs) for regional commercial licenses; one for regional non-interest banking.
Also, 16 new microfinance banks were re-licenced out of the 53 previously revoked microfinance banks and five new approvals were granted for operations as Finance Houses.
Equally, in line with the ambition of the current administration of achieving a $1 trillion economy by 2030, the CBN highlighted the need for stronger and better-capitalised banks which are better equipped to service the needs of a fast-growing economy, thus necessitating the call for recapitalisation.
In March 2024, the CBN announced an increase in the capital requirements for banks operating in Nigeria across the different licence categories, with a deadline of March 31, 2026. Options include equity issuance, mergers, or license adjustments. The new minimum capital base for commercial banks with international licences is N500 billion, while that for commercial banks with national licences is N200 billion. A N50 billion minimum is required for commercial banks with regional licences; for merchant banks with national licences N50 billion; and for national and regional non-interest banks, the base is N20 billion and N10 billion, respectively.
Regulatory Review for Bureau de Change
Also, in the last one year, the central bank unfolded new licencing requirements, capital standards, and a franchise model to enhance forex distribution and oversight for BDCs. The new guidelines were issued according to section 56 of the Banks and Other Financial Institutions Act (BOFIA) 2020 and superseded the 2015 Revised Operational Guidelines for Bureau De Change in Nigeria and any other circular or guidelines on BDCs issued by the CBN.
The new guidelines introduced two categories of licences, which included Tier 1 and Tier 2 categories. Accordingly, existing BDCs are required to re-apply for a new licence based on their preferred category of licence and meet the minimum capital requirements for the licence category applied for within six months from the effective date of the Guidelines, which was June 2024. Tier 1 BDCs are required to have a minimum capital of N2 billion lodged with the CBN; and to pay N1 million non-refundable application fees and N5 million as non-refundable license fees. On the other hand, Tier 2 BDCs are required to have a minimum capital requirement of N500 million; and to pay N250,000 non-refundable application fees and N2 million as non-refundable license fees.
Consumer Protection Practices
There was a comprehensive review of consumer protection regulations in February 2024 to improve standards and address emerging Fintech risks, enhanced customer service standards and increased engagement with formal financial institutions. Precisely, a Pilot Consumer Protection Risk-Based Examination was implemented to proactively identify policy gaps and improve conduct among financial institutions (FIs). This risk-based approach complements traditional compliance checks by highlighting urgent risks that could affect financial consumer protection (FCP).
Also, in the last one year, the CBN has rigorously enforced sanctions to ensure compliance, deter unethical behavior, and enhance transparency within the financial sector; addressed 19,988 complaints from customers in eight months and resolved 15,306 (76.58%) cases.
To ensure consumer satisfaction in the financial system, it has facilitated refunds totaling approximately N7.05 billion and $714,569.03 to customers disputing financial service providers, underscoring a commitment to fair treatment.
Financial Inclusion
Through enhanced service delivery, the apex bank ensured the Implementation of the Unified Complaints Tracking System (UCTS) and development of USSD (*959#) for verification of licensed financial institutions. The Cardoso-led CBN launched the Women Entrepreneurs Finance Initiative (We-FI) Code on June 20, 2024, aimed at closing the nine percent gender gap in financial inclusion by improving access to financial services for women-owned MSMEs.
Also, the National Financial Literacy Framework has been updated and benchmarked against global standards to improve financial literacy and decision-making among youth, just as the Financial Education Curriculum Review was enhanced in Nigerian schools to align with global trends and promote financial inclusion.
Cybersecurity and AML/CFT/CPF Measures
Under Cardoso, consumer protection regulations have been fortified to boost confidence and safeguard against unethical practices. The central bank has increased its focus on consumer protection through enhanced regulations and educational initiatives to help consumers navigate the financial system effectively. In the last one year, the central bank adopted ISO 27001 standards and introduced a risk-based Cybersecurity Framework. It also conducted a Cyber and Technology Assessment to improve resilience and operational efficiency. In addition, it revised the guidelines to include Virtual Assets Service Providers (VASPs) and updated anti-money laundering measures to adapt to evolving digital asset trends.
It has also promoted adherence to regulatory standards and improved disclosure practices within the Fintech sector; introduced new guidelines to curb cybersecurity threats, increase diaspora remittances, and improve capital inflows; implemented stricter KYC and AML requirements, including linking Tier 1 and wallet accounts to BVNs or NINs, and enforced a temporary restriction on new account openings to prevent fraud and enhance industry integrity.
Financial System Regulation Reforms
In the last 365 days, the CBN revised the minimum Loan-to-Deposit Ratio (LDR), prohibited foreign currency (FCY) denominated collaterals for local currency (LCY) loans, and adjusted the Cash Reserve Ratio (CRR) Framework. These measures supported monetary policy and helped in stabilising the financial system. Also, it intervened in governance issues in three banks, revoked the licence of a national bank, and facilitated a merger to strengthen system stability.
Facilitating Nigeria’s Delisting from the FATF Grey List
The CBN has significantly enhanced supervision and conducted spot checks on Nigerian banks and their foreign subsidiaries to expedite Nigeria’s delisting from the Financial Action Task Force (FATF) Grey List. These efforts aim to create a more secure investment environment, attract foreign investment, and bolster Nigeria’s global financial reputation. In July 2024, the CBN introduced guidelines to improve the management of dormant accounts, unclaimed balances, and other financial assets. The objectives included identifying dormant accounts and unclaimed balances to reunite them with their owners; holding these funds in trust for rightful owners, standardising management practices and stablishing procedures for reclaiming warehoused funds.
The guidelines addressed issues such as inadequate compensation for funds and risks of fraudulent transactions, thereby reinforcing trust and confidence in the financial system. Also, to improve financial system resilience, the CBN prohibited banks from distributing unearned income, such as foreign currency (FCY) revaluation gains, for the financial year ending December 31, 2023. This measure strengthened banks’ countercyclical buffers and ensured investors received a clear picture of bank performance, fostering informed investment decisions and promoting market integrity.
Another remarkable measure adopted by the bank was its suspension of the processing fees on cash deposits exceeding N500,000 for individuals and N3,000,000 for corporates from May 6, 2024, to September 30, 2024. Additionally, a 3-month waiver (from January 15 to April 15, 2024) was granted to Deposit Money Banks (DMBs) for depositing lower denominations (N50 and below) with the CBN at no processing cost. This initiative encourages cash deposits, strengthens financial intermediation, and aids in the effective transmission of monetary policy.
The CBN also improved its Early Warning Systems to monitor systemic risks and vulnerabilities. Key developments include monitoring of financial soundness indicators and net open positions as well as the implementation of regulatory sanctions on non-compliant banks. These measures facilitated timely intervention to manage potential contagion risks and ensure the safety and soundness of the financial sector.
Future Direction
Cardoso’s first year at the CBN has been marked by a delicate balancing act between addressing immediate economic challenges and laying the groundwork for long-term sustainable growth. While significant progress has been made in certain areas, inflationary pressure and forex challenges remain. The success of Cardoso’s tenure will ultimately depend on his ability to navigate these complexities and deliver tangible benefits to the Nigerian people. Therefore, there is a need for continued emphasis on maintaining a robust regulatory framework to support economic growth and stability. The CBN aims to position Nigeria as a leading financial hub in Africa, driving long-term economic development and growth. This can be achieved by sustaining the harmony between fiscal and monetary policy in the country.
