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The Article IV Consultations on Nigeria, released last week by the International Monetary Fund (IMF), acknowledged the Central Bank of Nigeria’s (CBN) significant efforts to strengthen the banking system and raise capital across the sector. The IMF praised initiatives to boost financial inclusion and deepen capital market development, while calling for a robust, risk-based supervisory framework—especially in mortgage, consumer lending, fintech, and cryptocurrency. It highlighted improved reserves, renewed investor confidence and naira stability as key outcomes of the CBN’s strategic reforms. These achievements, the Fund noted, signal progress in stabilising prices and the exchange rate, reports Assistant Editor COLLINS NWEZE

The International Monetary Fund (IMF) has commended the progress Nigeria has made in reforming its financial sector over the past two years. This acknowledgment followed the IMF’s recent Article IV Consultation, which focused primarily on the Central Bank of Nigeria’s (CBN) market reforms and their impact on forex inflows and macroeconomic stability. A major highlight of the report was the overhaul of the foreign exchange (FX) market and the sustained stabilisation of the naira.

According to the IMF, these reforms have enhanced price discovery, improved dollar liquidity, and contributed significantly to restoring investor confidence. The Fund noted that Nigerian authorities had implemented major policy shifts that improved macroeconomic fundamentals and economic resilience. The IMF Directors expressed support for the CBN’s tight monetary policy stance under Governor Olayemi Cardoso, recommending that it continue until disinflation becomes more firmly anchored. They welcomed the end of deficit monetisation and efforts to strengthen central bank governance as foundational steps toward inflation targeting.

The IMF emphasised the importance of a robust FX intervention framework focused on limiting excessive volatility. Directors urged Nigerian authorities to phase out existing capital flow management measures in a sequenced and timely manner, stressing that a flexible exchange rate remains a key buffer against external shocks. On the fiscal side, the IMF advised a neutral fiscal stance to preserve macroeconomic stability, prioritising growth-enhancing investments. It also called for accelerated delivery of cash transfers to support vulnerable populations. The fund praised the ongoing tax reform efforts, calling them essential for improving revenue mobilisation, ensuring debt sustainability, and creating fiscal space for developmental needs.

A major reform under Cardoso’s leadership was the dismantling of Nigeria’s long-standing multiple exchange rate regime. The CBN introduced a “willing-buyer, willing-seller” system facilitated by a digital trading platform known as B-Match. The impact has been significant: gross and net international reserves rose in 2024, supported by a strong current account surplus and increased portfolio inflows. FX inflows surged to $6.9 billion in Q1 2025, and external reserves peaked at $40.9 billion by the end of 2024—covering more than eight months of imports, well above international benchmarks.

Additionally, the FX premium—the gap between official and parallel market rates—narrowed from over 60 percent to under three per cent. As the IMF remarked, “reforms to the FX market and foreign exchange interventions have brought stability to the naira.” In January 2025, Nigeria returned to the Eurobond market for the first time in four years, a milestone that the IMF attributed to renewed investor confidence and improving macroeconomic conditions.

The IMF also praised ongoing efforts to strengthen Nigeria’s banking sector. This includes the recapitalisation plan that will significantly raise banks’ minimum capital by March 2026. According to the IMF Executive Board, this move will improve banks’ ability to absorb shocks, increase credit access, and support long-term planning for a projected $1 trillion Nigerian economy. Efforts to improve financial inclusion were also noted. Under Cardoso, the CBN is extending banking services to underserved populations through digital channels and financial literacy programmes like the Women’s Financial Inclusion Initiative (Wi-Fi).

The IMF acknowledged Nigeria’s progress in strengthening its Anti-Money Laundering and Combating the Financing of Terrorism (AML/CFT) frameworks. However, it stressed the importance of fully resolving remaining deficiencies to exit the Financial Action Task Force (FATF) grey list—a designation that subjects Nigeria to increased monitoring due to financial crime vulnerabilities. Despite these gains, the IMF warned of persistent risks. Inflation, while declining, remains high. Other challenges include infrastructure gaps, insecurity, red tape, and fiscal slippages. The Fund emphasised the importance of improving agricultural productivity, electricity supply, health and education spending, and climate resilience to ensure long-term, inclusive growth.

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.

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, prioritised 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 characterised 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. We remain focused on sustaining this progress through transparency, discipline, and market-driven reforms,” Cardoso commented.

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 licences 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.

The 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 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 licences 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.