The Central Bank of Nigeria (CBN) says reforms in the foreign exchange market and the recapitalisation of banks are helping to build a stronger and more resilient financial system.
The CBN Deputy Governor, Corporate Services, Dr Muhammad Abdullahi, made the assessment on Tuesday in Abuja at the 38th Seminar for Finance Correspondents and Business Editors Association of Nigeria (FICAN).
The seminar was themed “Towards a Robust and Resilient Financial System in the Banking Sector Recapitalisation Era.”
Abdullahi said the reforms were introduced after the CBN inherited significant economic and financial challenges in 2023, with the objective of restoring stability, rebuilding confidence and strengthening the apex bank’s core functions.
He said the foreign exchange market at the time was highly fragmented, with several official windows operating alongside a parallel market.
According to him, the difference between official and parallel-market exchange rates averaged more than 60 per cent in 2022 and exceeded 100 per cent during some periods, making it difficult for businesses and investors to plan.
He cited a World Bank estimate that the implicit subsidy created by the exchange-rate regime cost Nigeria about three per cent of GDP in 2022.
Abdullahi also disclosed that usable foreign reserves stood at only $859 million in the second quarter of 2023 after identified short-term obligations were taken into account, while outstanding foreign exchange forward claims exceeded $7 billion.
He said ways-and-means financing had reached N26.6 trillion by 2023, while legacy development finance exposures were above N10 trillion.
According to him, the resulting liquidity pressures contributed to difficulties in controlling inflation and weakened the effectiveness of monetary policy.
In response, the CBN consolidated existing foreign exchange windows in June 2023 and removed restrictions affecting 43 categories of imports.
The apex bank also reviewed outstanding foreign exchange claims and settled valid claims worth more than $5 billion.
It subsequently introduced stronger foreign exchange trading and reporting requirements, an electronic matching system for interbank transactions and the Nigeria FX Code.
Abdullahi said the FX Code established clearer standards of conduct and was designed to discourage speculative activities in the market.
He added that monetary policy was tightened, liquidity management was strengthened and development finance interventions were gradually reduced.
According to the deputy governor, the measures have contributed to greater stability in the foreign exchange market.
He said the average difference between official and parallel-market exchange rates fell from 68.2 per cent between January and May 2023 to less than two per cent currently.
Foreign exchange inflows have also become more diversified, with autonomous sources contributing $7.3 billion out of the $10.8 billion recorded in July.
Abdullahi said remittances through international money transfer operators reached $950 million in July, while gross external reserves stood at $55.6 billion as of September 11.
He also reported improvements in some key economic indicators, saying inflation declined from a peak of 34.8 per cent in December 2024 to 15.43 per cent in July 2026.
Real GDP, he added, expanded by 4.43 per cent in the second quarter of 2026, with non-oil activities playing a major role in the growth.
However, Abdullahi acknowledged that the improvement in headline economic indicators had not eliminated the difficulties still facing households and businesses.
He said the CBN’s focus was now on preserving the gains from the reforms while attracting more investment and strengthening the country’s sources of foreign exchange.
On banking sector recapitalisation, Abdullahi said all 33 banks had met the revised minimum capital requirements by the end of the two-year programme, raising a combined N4.65 trillion.
He said stronger bank capital was important to Nigeria’s ambition of building a $1 trillion economy by 2030.
Well-capitalised banks, he explained, would have greater capacity to finance infrastructure, industrial expansion and international trade, while also being better positioned to withstand financial shocks.
He stressed that recapitalisation alone would not be enough, urging banks to strengthen corporate governance, internal controls and risk-management systems.
Banks, he said, must properly manage credit, market, liquidity and operational risks while also paying greater attention to cybersecurity and third-party risks.
The CBN, he added, would continue monitoring banks’ governance structures, asset quality, liquidity positions and large exposures.
Abdullahi also called on financial institutions to protect customers’ data, maintain reliable payment systems and ensure they can quickly recover from operational disruptions.
He said the rapid growth of digital financial services made stronger investment in cybersecurity, data protection, disaster recovery and business continuity increasingly important.
The deputy governor stressed that the benefits of recapitalisation should go beyond stronger balance sheets and translate into better banking services and increased lending to productive sectors.
He urged banks to expand financing for agriculture, manufacturing, services and infrastructure while improving access to financial services for rural communities, women and young entrepreneurs.
“Consumer protection and financial inclusion remain integral to building a resilient financial system,” Abdullahi said.
He also encouraged businesses to work more closely with banks while improving their transparency, governance and sustainability practices.
Abdullahi commended financial journalists for their role in explaining financial-sector reforms and helping Nigerians understand their impact.
He said accurate and objective reporting could strengthen markets, improve investor education and promote informed public discussions.
The deputy governor said the three-year reform programme had produced stronger foundations for monetary and financial stability but warned that sustaining the progress would require disciplined supervision, responsible banking and continued attention to the needs of businesses and households.
He described financial stability as a shared responsibility involving regulators, banks, businesses, investors, the media and the public.
Earlier, the Director of the CBN’s Stakeholder Engagement and Institutional Relations Department, Hakama Sidi-Ali, praised the media for supporting the bank’s communication and engagement with Nigerians.
She said feedback from journalists had contributed to improving the CBN’s communication over the past three years and pledged continued cooperation with the media.
Sidi-Ali also urged journalists to extend similar support to the new Director of Corporate Communications, Michael Akuka.
Akuka said the banking sector had entered a new phase following the recapitalisation exercise.
According to him, the focus should now shift from whether banks were capable of raising the required capital to how effectively they would deploy the additional funds.
“The concern is how stronger balance sheets can translate into a financial system that can block shops, finance real economic activities, and maintain the confidence of the Nigerian people,” Akuka said.
He urged finance correspondents and business editors to look beyond headlines when reporting monetary and financial-sector developments.
“Go past the headline, ask follow-up questions. You can ask the second question, the third, the fourth and as many as you need to ask,” he said.
Source: NAN.
