The Central Bank of Nigeria (CBN) has implemented transformative reforms that have significantly increased foreign portfolio investments, soaring from $756.1 million pre-reforms to an impressive $3.48 billion within six months. These policy measures, including the floatation of the naira and the clearance of over $7 billion in foreign exchange (forex) backlogs, have restored investor confidence and earned accolades from global financial institutions like the World Bank.
Stabilizing Inflation and Foreign Exchange Markets
To ensure financial stability, the CBN has maintained its benchmark interest rate at 27.50%, following a series of hikes in the past year. The goal is to curb inflation, which had surged to 27%—partly driven by an excessive money supply growth averaging 13% annually over eight years. This inflationary pressure had contributed to the depreciation of the naira.
CBN Governor Olayemi Cardoso reiterated the importance of taming inflation and strengthening the foreign exchange market, ensuring Nigeria remains attractive to investors.
One of the most pressing economic concerns was the country’s unsustainable deficit financing. The CBN tackled this by addressing the Ways and Means advances, which had ballooned to N22.7 trillion by 2023, accounting for approximately 11% of GDP. Additionally, the bank took steps to manage over N10 trillion in quasi-fiscal interventions that had previously eroded market confidence
Nigeria’s Return to the International Debt Market
After a two-year hiatus, Nigeria successfully re-entered the international debt market in November 2024, raising $2.2 billion through Eurobonds. The strong investor demand—exceeding $9 billion—signifies growing confidence in the country’s economic direction and management.
In a move to fortify the financial system, the CBN has mandated that Nigerian banks strengthen their balance sheets by March 2026. New capitalization requirements include:
International banks: N500 billion
National banks: N200 billion
Regional banks: N50 billion
This initiative aims to enhance banking sector resilience amid Nigeria’s evolving economic landscape.
Looking ahead, the CBN has announced plans to issue a diaspora bond in the United States in 2025. This initiative aims to increase remittance inflows to $1 billion per month, leveraging the trust of Nigerians abroad in the ongoing economic reforms.
Conclusion
The CBN’s bold reforms are driving a resurgence in foreign investments and strengthening Nigeria’s economic outlook. From inflation control and deficit reduction to financial sector stability and re-entry into global markets, these measures are positioning Nigeria as a prime destination for investors.