The International Monetary Fund (IMF) has in its recent Article IV Consultations on Nigeria, recognised measures taken by the Central Bank of Nigeria (CBN) to strengthen the banking system and recapitalize the banks. The Fund welcomed the CBN’s efforts to enhance financial inclusion and promote capital market growth, while emphasising the need to adopt a robust risk-based supervision for mortgage, consumer lending, fintech and crypto sectors. The bolstering of the reserves, rising market confidence and ongoing stability of the naira represent honest feedback from the Fund on CBN’s strategic output for the domestic economy.
The International Monetary Fund (IMF) on Wednesday gave a strong and honest feedback on the over two years reforms in the Nigeria financial sector.
The feedback came after its visit to Nigeria and release of the Article IV Consultations on the country. The report majorly focused on reforms in the financial services sector and the role played by Olayemi Cardoso-led Central Bank of Nigeria (CBN) to deepen market confidence through improved forex inflows.
Firstly, the Fund applauded reforms in the foreign exchange market, and ongoing stability of the naira adding that the reforms have supported price discovery and enhanced dollar liquidity in the economy.
The Fund said Nigerian authorities have implemented major reforms over the past two years which have improved macroeconomic stability and enhanced resilience.
According to the report, IMF Directors agreed that the CBN is appropriately maintaining a tight monetary policy stance, which should continue until disinflation becomes entrenched. They welcomed the discontinuation of deficit monetization and ongoing efforts to strengthen central bank governance to set the institutional foundation for inflation targeting.
The Fund called for implementation of a robust foreign exchange intervention framework focused on containing excess volatility, stressing that the exchange rate is an important shock absorber. Directors also agreed with staff’s call to phase out existing capital flow management measures in a properly timed and sequenced manner.
Directors called for a neutral fiscal stance to safeguard macroeconomic stabilization with priority given to investments that enhance growth. Directors also called for accelerating the delivery of cash transfers to assist the poor. They commended the authorities on advancing the tax reform bill, an important step towards enhancing revenue mobilization and creating fiscal space for development spending, while preserving debt sustainability.
The CBN, under the leadership of Cardoso, dismantled the long-standing multiple exchange-rate regime, replacing it with a “willing-buyer, willing-seller” framework supported by a digital trading platform (B-Match).
The results have been transformative. As the IMF noted, “gross and net international reserves increased in 2024, with a strong current account surplus and improved portfolio inflows.” The FX premium, or gap between official and parallel markets, has fallen from over 60 percent to below 3 percent. FX inflows have surged to $6.9 billion in Q1 2025, and external reserves climbed to a peak of $40.9 billion at the end of 2024, providing over eight months of import–well above benchmark thresholds. “Reforms to the FX market and foreign exchange interventions have brought stability to the naira,” the IMF noted.
In January 2025, Nigeria successfully returned to the Eurobond market, its first issue in four years, reflecting, as the IMF noted, “strengthened investor confidence” and “a resumption of portfolio inflows.”
The Fund “recognised actions to strengthen the banking system, including the ongoing process of increasing banks’ minimum capital,” as stated in the IMF Executive Board Assessment. It also “welcomed the authorities’ efforts to boost financial inclusion and promote capital market development.”
The CBN’s recapitalisation plan will see banks’ minimum capital raised significantly by March 2026. This move is designed to ensure banks can absorb future shocks, deepen credit access, and support the planning for a $1 trillion Nigerian economy.
At the same time, Governor Cardoso’s team is expanding access to banking services for previously excluded demographics through digital platforms and financial literacy programmes, such as the Women’s Financial Inclusion Initiative (Wi-Fi).
As stated in the IMF Executive Board Assessment, the Fund “welcomed progress made in strengthening the AML/ CFT framework”, Anti-Money Laundering and Combatting the Financing of Terrorism. It “stressed the importance of resolving remaining weaknesses to exit the FATF grey list,” a designation for jurisdictions under increased monitoring by the Financial Action Task Force due to gaps in their anti-financial crime regimes.
Further significant challenges remain. Inflation, though declining, remains a burden. Infrastructure deficits, insecurity, and fiscal slippages could derail progress. The Fund “highlighted the importance of tackling security, red tape, agricultural productivity, infrastructure gaps, including boosting electricity supply, as well as improved health and education spending, and making the economy more resilient to climate events.”
The Article IV Report also projected that Real GDP will grow by 3.4 per cent in 2025, supported by the new domestic refinery, higher oil production, and a strong services sector. Amid a complex and uncertain external environment, medium-term growth is expected to remain around 3.5 per cent, supported by domestic reform gains.
The IMF further observed that gross and net international reserves rose in 2024, supported by a strong current account surplus and better portfolio inflows, adding that Reforms to the FX market and foreign exchange interventions had stabilised the naira.
Read also: Exchange rate gap narrows on rising FX inflows, CBN policies
Net FX reserves position rises
Cardoso-led Central Bank of Nigeria (CBN) recently announced quantum leap in the net FX reserve position at $23.11 billion at the end of last year.
Cardoso had upon assuming office in October 2023, prioritized reforms to rebuild Nigeria’s economic buffers and strengthen resilience.
In the foreign exchange market, the apex bank faced a backlog of over $7 billion in unfulfilled commitments and a fragmented FX regime characterized by multiple forex rates, which had encouraged arbitrage opportunities.
This regime stifled much needed foreign investment, and led to the depletion of our external reserves which fell to $33.22 billion in December 2023.
“Over the past year, we have undertaken critical reforms to unify Nigeria’s exchange rate, eliminating distortions and restoring transparency. This unification has enabled us to clear the outstanding foreign exchange obligations, giving businesses—ranging from manufacturers to airlines—the confidence to plan and invest in the future. To further enhance the functionality of the foreign exchange market, we are introducing an electronic FX matching system, which has proven effective in other markets,” Cardoso said.
According to the apex bank data, NFER stood at $23.11 billion, the highest level in over three years, a marked increase from $3.99 billion at year-end 2023, $8.19 billion in 2022, and $14.59 billion in 2021.
The NFER, which adjusts gross reserves to account for near-term liabilities such as FX swaps and forward contracts, is widely regarded as a more accurate indicator of the foreign exchange buffers available to meet immediate external obligations.
Gross external reserves also increased to $40.19 billion, compared to $33.22 billion at the close of 2023.
The increase in reserves reflects a combination of strategic measures undertaken by the CBN, including a deliberate and substantial reduction in short-term foreign exchange liabilities – notably swaps and forward obligations.
The strengthening was also spurred by policy actions to rebuild confidence in the FX market and increase reserve buffers, along with recent improved foreign exchange inflows – particularly from non-oil sources.
The result is a stronger and more transparent reserves position that better equips Nigeria to withstand external shocks. The expansion occurred even as the CBN continues to reduce short-term liabilities, thereby improving the overall quality of the reserve position.
“This improvement in our net reserves is not accidental; it is the outcome of deliberate policy choices aimed at rebuilding confidence, reducing vulnerabilities, and laying the foundation for long-term stability,” Cardoso, commented.
“We remain focused on sustaining this progress through transparency, discipline, and market-driven reforms.”
Reserves have continued to strengthen in 2025. While the first quarter figures reflected some seasonal and transitional adjustments, including significant interest payments on foreign-denominated debt, underlying fundamentals remain intact, and reserves are expected to continue improving over the second quarter of this year.
Going forward, the CBN anticipates a steady uptick in reserves, underpinned by improved oil production levels, and a more supporting export growth environment expected to boost non-oil FX earnings and diversify external inflows.
The CBN remains committed to prudent reserve management, transparent reporting, and macroeconomic policies that support a stable exchange rate, attract investment, and build long-term resilience.
More FX sources bolster inflows
Foreign capital inflows to the domestic economy remains crucial elements in the drive to achieve monetary and fiscal policy stability.
The apex bank is cultivating more sources of FX to increase dollar inflows, boost access to manufacturers and retail end users.
From moves to boost diaspora remittances through new product development, the granting licenses to new International Money Transfer Operators (IMTOs), implementing a willing buyer-willing seller FX model, and enabling timely access to naira liquidity for IMTOs, the CBN has simplified dollar-inflow channels for FX dealers to boost business and economic growth.
President, Association of Bureaux De Change Operators of Nigeria (ABCON), Aminu Gwadabe, said the policy shifts showed the level of creativity, policy and hard work the Cardoso puts in ensuring that more forex flows into the economy and remain accessible to businesses.
He said diaspora remittances to Nigeria, estimated at $23 billion annually remain a reliable source of forex to the domestic economy. There are also other sources and policies that are being explored by the apex bank to keep dollar inflows coming.
According to him, the CBN’s initiatives have supported continued growth in these inflows, aligning with the institution’s objective of doubling formal remittance receipts within a year.
The remittances in the economy is expected to increase based on CBN’s ongoing efforts to bolster public confidence in the foreign exchange market, strengthen a robust and inclusive banking system, and promote price stability, which is essential for sustained economic growth.
Director of Trading at Verto, Charlie Bird, said dollar liquidity dynamic is now more balanced, with foreign investors and airlines able to repatriate funds.
Speaking during Cordros Asset Management seminar titled: “The Naira Playbook”, he said Nigeria is now darling of foreign investors because of improved dollar liquidity in the economy due to positive CBN’s reforms.
For instance, the CBN under Cardoso, recently announced the introduction of two new financial products designed to serve Nigerians living abroad and attract more diaspora remittances.
These and other measures, including the granting licenses to new International Money Transfer Operators (IMTOs), implementing a willing buyer-willing seller model, and enabling timely access to naira liquidity for International Money Transfer Operators (IMTOs).
The CBN recently released the reviewed guidelines of International Money Transfer Services in Nigeria. These Guidelines mark a significant shift in how IMTOS conduct their operations, reflecting the CBN’s ongoing efforts to enhance transparency and efficiency in foreign exchange transactions and to bolster diaspora remittances into Nigeria.
Further circular titled “New Measures to Enhance Local Currency Liquidity for Settlement of Diaspora Remittances” highlighted the apex bank’s commitment to improving the Nigerian foreign exchange market infrastructure by increasing the flow of remittances through formal channels.
It introduces measures aimed at providing licensed IMTOs with access to Naira liquidity from the CBN, facilitating the disbursement of remittances to beneficiaries.
Nwadike, a Financial analyst, writes from Lagos
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