Credit, growth and CBN’s balancing act

Nigeria is demonstrating the critical importance of economic stability, with recent data indicating a significant turnaround in its financial landscape. Headline inflation has declined to 15.91% as of June 2026, with core inflation closely following at 15.92%. Although food inflation remains elevated at 17.52%, the overall trend signals a substantial improvement from previous periods.

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Stability is not everything, but without stability, everything is nothing.

The foreign exchange market has stabilized considerably compared to 2023 and 2024, with the official exchange rate hovering near ₦1,380 to the dollar and the gap with the parallel market narrowing to under two percent. External reserves have surged past $52 billion, marking a 17-year high. Furthermore, official remittances have seen a significant increase, and broad money growth has decelerated from over 56% in 2024 to below 14%. These positive developments are attributed to a combination of restrictive monetary policies, foreign exchange reforms, fiscal adjustments, and favorable supply conditions.

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Price stability is the mandate, and rightly so.

The Central Bank of Nigeria (CBN) is credited for these achievements, particularly its tightening monetary cycle which saw the Monetary Policy Rate (MPR) rise from 18.5% in May 2023 to a peak of 27.5%. Although the MPR was eased to 26.5% in February 2026 and held at that level in July, alongside the 45% Cash Reserve Requirement, the focus now shifts from mere stabilization to fostering growth.

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Persistent inflation erodes purchasing power and savings, and its burden is uneven: the wealthy shelter in assets and foreign currency, while the wage earner, pensioner and small trader holding cash cannot. Inflation is a regressive tax in all but name.

The core mandate of the CBN, as outlined in the CBN Act, is monetary and price stability. However, the Act also tasks the Monetary Policy Committee with supporting the Federal Government's economic policy, emphasizing that stability should pave the way for growth. Persistent inflation erodes purchasing power and disproportionately affects wage earners and small traders. The current challenge for the CBN is to ensure that the achieved stability translates into tangible growth in investment, productivity, employment, and real incomes, making credit accessible and affordable for businesses.

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Seen in this light, the CBN’s tightening cycle was not hostile to growth.