Nigeria central bank defends macro gains as lawmakers probe bank lending
Central Bank of Nigeria Governor Olayemi Cardoso reported stabilizing inflation and record external reserves, but faces pressure from legislators over banks hoarding fresh capital in government securities instead of funding the real economy.
Central Bank of Nigeria Governor Olayemi Cardoso told lawmakers that external reserves have reached $52.73 billion and inflation has eased to 15.91 percent, signaling macroeconomic stabilization. However, the briefing highlighted growing friction between the apex bank and the legislature over how the financial sector is deploying its newly raised capital.
For investors, the accumulation of foreign exchange buffers and the stabilization of the naira at an average of 1,375.40 per dollar in the first half of 2026 represent critical risk mitigants. Cardoso noted that official diaspora remittances have surged to over $600 million monthly, with a target of $1 billion by year-end, further bolstering external liquidity.
The central bank also declared its banking recapitalization program a success, noting that lenders raised 4.65 trillion naira in fresh equity. Domestic investors provided 72.55 percent of this capital, while foreign investors contributed the remainder, bringing 33 institutions into compliance with revised requirements.
Despite this capital influx, Senate Committee Chairman Tokunbo Abiru expressed concern that private sector credit has actually moderated. Lawmakers suspect that banks are concentrating their new funds in risk-free, short-term financial instruments rather than extending affordable loans to productive sectors like agriculture and manufacturing.
This dynamic is underscored by a massive expansion in the central bank's liquidity sterilization operations. Outstanding Open Market Operation bills nearly doubled to 48.7 trillion naira in 2025 from 24.3 trillion naira the previous year, prompting senators to demand explanations for the associated management costs and the impact on the CBN's operating expenses.
On the monetary front, Cardoso maintained the central bank's commitment to achieving single-digit inflation over the medium term. He explained that headline inflation had resumed a downward trajectory after a brief spike driven by Middle East geopolitical tensions, validating the effectiveness of current policy settings.
The committee subsequently moved into a closed-door session to press Cardoso on these issues. Lawmakers are seeking clarity on the conditions required to resume monetary easing, as well as the regulatory framework for financial holding companies, ensuring that regulatory reforms do not impose excessive compliance costs on the sector.
