Cardoso Flags Election Spending, Liquidity Risks to Nigeria’s Economic Reforms
- The CBN governor warned that excess liquidity and the 2027 election cycle could undermine recent economic stability
- Cardoso said the CBN adopted orthodox monetary policy, FX market reforms and tighter fiscal coordination to address the crisis
- Cardoso said sustained gains depend on fiscal discipline, policy coordination and careful management of election-related risks
Oluwatobi Odeyinka is a business editor at Legit.ng, covering energy, the money market, technology and macroeconomic trends in Nigeria.
The governor of the Central Bank of Nigeria, Olayemi Cardoso, has cautioned that lingering excess liquidity and the approach of the 2027 general elections could threaten Nigeria’s recent macroeconomic stability if not carefully managed.
Source: Getty Images
Cardoso gave the warning while speaking at the National Economic Council (NEC) Conference 2026 held at the Presidential Villa, Abuja.
The conference was themed “Delivering Inclusive Growth and Sustainable National Development: The Renewed Hope National Development Plan.”
His remarks came ahead of a panel session on “Fiscal and Monetary Outlook 2026–2030: Priorities and Imperatives.”
According to the CBN governor, the bank inherited an economy weighed down by the consequences of prolonged loose monetary policy, including excess liquidity, persistent inflation and distortions in the foreign exchange (FX) market.
He recalled that inflation had climbed as high as 34.6%, while the FX market faced a backlog of more than $7 billion, with the gap between official and parallel market rates exceeding 16%. Cardoso said the situation eroded investor confidence and discouraged the use of the naira.
Cardoso speaks on previous CBN interventions
He added that previous large-scale interventions by the Central Bank, which rose to about N10.93 trillion, offered short-term relief but created long-term challenges such as excess liquidity and higher liquidity management costs.
Cardoso explained that the current reform programme rests on three main pillars. The first is a shift to orthodox monetary policy, including an aggressive 875 basis-point increase in the Monetary Policy Rate to rein in inflation and the gradual withdrawal from quasi-fiscal intervention programmes.
The second pillar, he said, is the establishment of a market-driven foreign exchange regime, with unification of FX rates, price discovery and the clearance of the FX backlog, alongside improved transparency.
The third pillar focuses on stronger fiscal coordination and systemic resilience, including adherence to statutory limits on deficit financing and a sharp reduction in Ways and Means advances to the federal government, which fell from 2.65% of GDP in 2023 to 0.69% in 2024.
Nigeria records GDP growth of 3.98%
Highlighting the outcomes of these measures, Cardoso said Nigeria has recorded GDP growth of 3.98%, a current account surplus of $3.42 billion in the third quarter of 2025, and improvements in inflation trends and banking sector stability. He also noted that external reserves had risen to about $49 billion as of February 5, 2026.
He said the narrowing of the gap between official and parallel FX markets to below 2% has improved confidence in the naira and enhanced predictability for businesses and travellers.
CBN to prioritise price stability
Looking ahead, Cardoso said the 2026–2030 roadmap prioritises price stability, FX market normalisation, stronger external reserves, banking sector recapitalisation and financial system resilience, all aimed at supporting Nigeria’s ambition of becoming a $1 trillion economy.
However, he warned that risks remain, particularly excess liquidity in the system and the impact of election-related spending ahead of the 2027 polls. According to him, unchecked liquidity injections during election cycles could undermine the gains from recent reforms.
Cardoso stressed that while monetary policy is essential, it cannot work in isolation. He said lasting stability requires fiscal discipline, supply-side reforms and stronger coordination among institutions, especially given challenges such as food supply shocks, high energy costs and infrastructure deficits.
Source: Getty Images
State govt plays major role in economic stability – Cardoso
He also noted that sub-national governments play a critical role in macroeconomic stability, as they control more than half of total government revenue and spending.
By 2030, the CBN aims to achieve single-digit inflation, higher foreign exchange reserves supported by non-oil exports, foreign direct investment and remittances, as well as a more inclusive and globally competitive financial system.
Cardoso concluded by assuring stakeholders that the Central Bank remains committed to its reform agenda but cautioned that sustained focus and vigilance are required to manage emerging risks and protect the economy’s recovery.
CBN cashes naira, mops up dollars
Legit.ng earlier reported that the naira gained against the US dollar after the CBN intervened to stabilise the currency’s appreciation.
Nigeria's external reserves rose by $736.67 million, bolstering market confidence amid stabilising factors.
The naira strengthened at the Nigerian Foreign Exchange Market in an environment of subdued demand pressures, supported by steady inflows from foreign portfolio investors, exporters, and non-bank corporates.
Source: Legit.ng
