FX reform improved market efficiency but structural financing gaps persist – CPPE

The Centre for the Promotion of Private Enterprise (CPPE) says the Central Bank of Nigeria (CBN), under the leadership of Olayemi Cardoso, its governor, has improved market efficiency through its foreign exchange (FX) reform.

In a statement reviewing two years of Cardoso’s tenure as CBN governor on Sunday, Muda Yusuf, the chief executive officer (CEO) of the CPPE, said the reforms introduced under his leadership have contributed to restoring credibility, enhancing governance, and stabilising the macroeconomic environment.

He, however, warned that critical structural financing gaps remain unaddressed.

“Nigeria’s financial system has historically faced challenges, including foreign exchange market distortions, weak corporate governance, excessive monetary financing, and limited access to affordable credit,” Yusuf said.

“These issues contributed to macroeconomic instability, inflationary pressures, and suboptimal economic performance. The Cardoso-led CBN has sought to address these problems through bold reforms, focusing on transparency, stability, and credibility.”

The CEO said one of the significant reforms under Cardoso has been the liberalisation and unification of Nigeria’s foreign exchange (FX) market.

He said the elimination of multiple exchange windows had improved transparency, reduced arbitrage opportunities, and attracted more autonomous inflows into the FX market.

Yusuf also noted improvements in institutional governance at the CBN, citing stronger internal controls, enhanced monetary discipline, and reduced political interference in the apex bank’s operations.

The CPPE boss also highlighted measures taken by the CBN to strengthen the financial system, including banking sector recapitalisation and stronger risk management frameworks.

“Through a mix of monetary policy tools—including interest rate hikes, liquidity management, and market reforms—the CBN has contributed to the recent deceleration in inflation and restoration of macroeconomic stability,” he added.

However, the economist raised concerns about the CBN’s aggressive monetary policy stance, warning that high interest rates and restrictive liquidity conditions are weighing heavily on the real sector.

Yusuf cited the current monetary policy rate (MPR) of 27.5 percent and cash reserve ratio (CRR) of 50 percent as major constraints on credit availability.

“Elevated lending rates have suppressed private sector borrowing, particularly in manufacturing, Agriculture, SMEs, real estate and other sectors,” the CEO said.

“There is a growing risk that private investment could be displaced by high-yield government instruments.”

Despite improvements in market efficiency, the CPPE chief said structural financing gaps — especially for small businesses and infrastructure — remain largely unaddressed.

“Infrastructure, industrial, agricultural, construction, and real estate projects lack patient capital and affordable long-term funding mechanisms,” he said.

‘INTRODUCE CREDIT GUARANTEE SCHEME TO ADDRESS FINANCING GAP’

Yusuf called for the introduction of credit guarantee schemes and concessional funding for SMEs, as well as the promotion of long-term development finance instruments to address the gaps.

To support sustainable growth, he advised the CBN to begin a gradual easing of monetary policy as inflation slows to create a more enabling credit environment.

The CPPE boss recommended a mix of monetary and supply-side policies to tackle inflation, calling for deeper reforms in the financial market to mobilise domestic capital.

The economist also urged the CBN to institutionalise governance reforms, strengthen legal safeguards for the apex bank’s autonomy, and improve policy communication.

“Broaden consultation with industry players and development partners to foster inclusive decision-making,” he added.

While commending the progress made so far, the CPPE chief said the next phase of reform must achieve a more balanced policy stance that promotes growth while preserving macroeconomic stability.(The Cable)