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When will CBN begin inflation targeting and save Nigerians from its raving effect?

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15 years ago

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By Omoh Gabriel, Business Editor
The macro-economic goals any government seeks to achieve at any given time are full employment of human and material resources, price stability, economic growth, balance of payment position and stable exchange rate. These goals are prescribed and targets set on annual basis through fiscal and monetary policies. For each of these policy trade off are needed in other to achieve macro economic stability. Policy makers have to chose how much of unemployment is desirable to achieve a given level of price stability. In all price stability preoccupies modern central bankers. Globally, inflation targeting has taken the central stage of economic policy. Efforts of central banks has shifted from interest rate to inflation targeting.
While other central bank are busy designing policy to target inflation in order to ensure quality for the citizenry through low prices of goods and services, the Central Bank of Nigeria is saddled with interest rate monitor and banking supervision. It has almost left its core mandate in recent time
Inflation targeting as practised in other developing and developed economy, is an economic policy in which a central bank estimates and makes public a projected, or “target”, inflation rate and then attempts to steer actual inflation towards the target through the use of interest rate changes and other monetary tools.
Because interest rates and the inflation rate tend to be inversely related, the likely moves of the central bank to raise or lower interest rates become more transparent under the policy of inflation targeting.
An analysis of external and fiscal dominance in the Nigerian economy show that government pursuit of low inflation rate and an exchange rate stability in the last twenty years or so has not achieved any measure of success and that none of the applied strategies has been particularly appealing.
The CBN it seems have been adopting a long-run target for inflation combined with a free float. This has not yielded the needed results. Government it would appear is under pressure to deliver the dividend of democracy and is looking for quick win situation.
As a result the International Monetary Fund, IMF, in its 2010 article iv consultation with Nigerian urged the CBN to focus more on inflation targeting, instead of the current focus on banking supervision saying the naira was currently over-valued. The board also expressed concern about potentially conflicting objectives of the Central Bank of Nigeria Monetary policy, advising it to scale back its development finance initiatives which in them selves are extra budgetary provisions that fuel inflation.
According to the IMF directors expressed concerns about potentially conflicting objectives of monetary policy and advised that the policy framework should focus more clearly on price stability.
The inflation risk hinges crucially on the 2011 budget. The National Assembly has passed a more expansionary budget of N4.6 trillion for 2011, undermining the CBN’s ability to deliver on inflation.
The CBN has shown that it is ill equipped to fight inflation as inflation has been stuck in the low double digits for the past two years and foreign reserves have been falling because the CBN has focussed on maintaining exchange rate stability and low interest rates. The fiscal stimulus intensified in 2010, notwithstanding the already solid growth performance and high inflation.
The financial sector has also shown the inability of the apex bank to control interest rates as call and OBB rates rose to averages of 8.45 and 7.43 per cent, respectively, in October 2010, in response to the upward review of the MPR and IT challenges experienced in September, 2010. The rates, however, moderated to 8.06 and 6.86 per cent in December 2010, while MPR remained at 6.25 per cent. The average maximum lending rate decline from 22.20 in September, 2010 to 21.84 per cent in November 2010. The average prime lending rate also fell from 16.66 in September to 16.11 per cent November, 2010. The weighted average savings rate declined consistently from 3.2 and 1.95 per cent in March and June, 2010 to 1.49 and 1.48 per cent in September and November, 2010, respectively. The consolidated deposit rate which declined from 2.09 per cent in June to 2.07 per cent in September rose to 2.36 per cent in November, 2010. Thus, the spread between the average maximum lending rate and the consolidated deposit rate widened from 19.94 per cent in June to 20.14 per cent September, before narrowing to 19.48 per cen
If the CBN were equipped and had adopted inflation targeting if inflation appears to be above the target, it will raise interest rates. This usually (but not always) has the effect over time of cooling the economy and bringing down inflation; if inflation appears to be below the target, the bank is likely to lower interest rates. This usually has the effect over time of accelerating the economy and raising inflation.
Under inflation targeting policy, investors know what the central bank considers the target inflation rate to be and therefore may more easily factor in likely interest rate changes in their investment choices. This is viewed by inflation targeters as leading to increased economic stability.
Inflation targeting is not new as early proposals of monetary systems targeting the price level or the inflation rate, rather than the exchange rate, followed the general crisis of the gold standard after World War I.
Irving Fisher an Economist proposed a “compensated dollar” system in which the gold content in paper money would vary with the price of goods in terms of gold, so that the price level in terms of paper money would stay fixed. Fisher’s proposal was a first attempt to target prices while retaining the automatic functioning of the gold standard. In his Tract on Monetary Reform (1923), John Maynard Keynes advocated what is now called an inflation targeting scheme. In the context of sudden inflations and deflations in the international economy right after World War I, Keynes recommended a policy of exchange rate flexibility, appreciating the currency as a response to international inflation and depreciating it when there are international deflationary forces, so that internal prices remained more or less stable.
Interest in inflation targeting schemes waned during the Bretton Woods system (1944–1971), as they are normally inconsistent with exchange rate pegs such as those prevailing during three decades after World War II. Inflation targeting was pioneered in New Zealand in 1990, and is now also in use by the central banks in United Kingdom Bank of England, Canada Bank of Canada, Australia Reserve Bank of Australia, South Korea Bank of Korea, Egypt, South Africa South African Reserve Bank, Iceland Central Bank of Iceland and Brazil Brazilian Central Bank, among other countries, and there is some empirical evidence that it does what its advocates claim.
In recent years industrial countries have phased out exchange rate pegs and monetary aggregates while non-industrial countries with flexible exchange rates have adopted single target regimes. Global integration has led to more flexible exchange rate regimes and agreement on merits of low-inflation;
Financial development has reduced the effectiveness of monetary aggregates.
Money aggregate targets are still the tools being used by the CBN hence most of the policy prescriptions run into a hitch. Although the CBN has held series of workshops and commissioned some experts to study the possibility of introducing inflation monitoring in Nigeria it has so far not taken the bull by the horns to initiate the policy. The big question is when will it do so?

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Afreximbank successfully closed its second Samurai Bond transactions, raising JPY 81.8bn or $527m

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1 week ago

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November 28, 2025

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African Export-Import Bank said it has successfully closed its second Samurai bond transaction, securing a total of JPY 81.8 billion (approx. USD 527 million) through Regular and Retail Samurai Bonds offerings.

The execution surpasses the Bank’s 2024 debut issuance size, attracting orders from more than 100 institutional and retail investors, marking a renewed demonstration of strong Japanese investor confidence in the Bank’s credit and its growing presence in the yen capital markets.

On 18 November, Afreximbank priced a JPY 45.8 billion 3-year tranche in the Regular Samurai market following a comprehensive sequence of investor engagement activities leveraging Tokyo International Conference on African Development (TICAD9), including Non-Deal Roadshows (NDRs) in Tokyo, Kanazawa, Kyoto, Shiga and Osaka, a Global Investor Call, and a two-day soft-sounding process which tested investor appetite across 2.5-, 3-, 5-, 7-, and 10-year maturities.

With market expectations of a Bank of Japan interest rate increase, investor demand concentrated in shorter tenors, resulting in a focused 3-year tranche during official marketing.

The tranche attracted strong participation from asset managers (22.3%), life insurers (15.3%), regional corporates, and high-net-worth investors (39.7%).

Concurrently, Afreximbank priced its second Retail Samurai bond on 18 November, a JPY 36.0 billion 3-year tranche, more than double the inaugural JPY 14.1 billion Retail Samurai issuance completed in November 2024.

The 2025 Retail Samurai bond also marks the first Retail Samurai bond issued in Japan in 2025.

Following the amendment to Afreximbank’s shelf registration on 7 November 2025, SMBC Nikko conducted an extensive seven-business-day demand survey through its nationwide branch network, followed by a six-business-day bond offering period.

The offering benefited from strong visibility supported by Afreximbank’s investor engagement across the country, including the Bank’s participation at TICAD9, where Afreximbank hosted the Africa Finance Seminar to introduce Multinational Development Bank’s mandate in Africa and its credit profile to key Japanese institutional investors.

MBC Nikko Securities Inc. acted as Sole Lead Manager and Bookrunner for both the Regular and Retail Samurai transactions. Chandi Mwenebungu, Afreximbank’s Managing Director, Treasury & Markets and Group Treasurer, commented:

“We are pleased with the successful completion of our second Samurai bond transactions, which marked a significant increase from our inaugural Retail Samurai bond in 2024, and which reflect the growing depth of our relationship with Japanese investors.

The strong demand, both in the Regular and Retail offerings, demonstrates sustained confidence in Afreximbank’s credit and mandate.

We remain committed to deepening our engagement in the Samurai market through regular investor activities and continued collaboration with our Japanese partners.”

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Ecobank unveils SME bazaar: a festive marketplace for local entrepreneurs

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1 week ago

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November 26, 2025

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Ecobank Nigeria, a member of Africa’s leading pan-African banking group, has announced the launch of the Ecobank SME Bazaar—a two-weekend festive marketplace designed to celebrate local creativity, empower entrepreneurs, and give Lagos residents a premium shopping experience this Detty December. The Bazaar will hold on 29–30 November and 6–7 December at the Ecobank Pan African Centre (EPAC), Ozumba Mbadiwe Road, Victoria Island, Lagos. Speaking ahead of the event, Omoboye Odu, Head of SMEs, Ecobank Nigeria, reaffirmed the bank’s commitment to supporting small and medium-sized businesses, describing them as the heartbeat of Nigeria’s economy. She explained that the Ecobank SME Bazaar was created to enhance visibility for entrepreneurs, expand market access, and support sustainable business growth.
According to her, “This isn’t just a market—it’s a vibrant hub of culture, commerce, and connection. From fresh farm produce to trendy fashion, handcrafted pieces, lifestyle products, and delicious food and drinks, the Ecobank SME Bazaar promises an unforgettable experience for both shoppers and participating SMEs. Whether you’re shopping for festive gifts, hunting for unique finds, or soaking in the Detty December energy, this is the place to be.” Ms. Odu added that participating businesses will enjoy increased brand exposure, deeper customer engagement, and meaningful networking opportunities—making the Bazaar a strong platform for both festive-season sales and long-term business growth. The event is powered by Ecobank in partnership with TKD Farms, Eko Marche, Leyyow, and other SME-focused organisations committed to building sustainable enterprises.

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16 banks have recapitalised before deadline—CBN

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1 week ago

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November 26, 2025

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The Central Bank of Nigeria (CBN) has said that16 banks have so far met the new capital requirements for their various licences, some four months before the March 31, 2026 deadline. The apex bank also indicated that 27 other banks have raised capital through various methods in one of the most extensive financial sector reforms since 2004. Addressing journalists at the end of the Monetary Policy Committee (MPC) meeting in Abuja, CBN Governor Mr Olayemi Cardoso said the banking recapitalisation was going on orderly, consistent with the regulator’s expectations. He said, “We are monitoring developments, and indications show the process is moving in the right direction.” Nigeria has 44 deposit-taking banks, including seven commercial banks with international authorisation, 15 with national authorisation, four with regional authorisation, four non-interest banks, six merchant banks, seven financial holding companies and one representative office.
Cardoso explained that eight commercial banks had met the N500 billion capital requirement as of July 22, 2024, rising to 14 by September of the same year. The number has now increased to 16 as the industry continues to race toward full compliance. He said that the reforms would reinforce the resilience of Nigerian banks both within the country and across the continent. “We are building a financial system that will be fit for purpose for the years ahead. Many Nigerian banks now operate across Africa and have been innovative across different markets. These new buffers will better equip them to manage risks in the multiple jurisdictions where they operate,” Cardoso said. According to him, the reforms would strengthen the financial sector’s capability to support households and businesses. He said, “Ultimately, this benefits Nigerians—our traders, our businesses and our citizens—who operate across those regions. “It should give everyone comfort to know that Nigerian banks with deep local understanding are present to support them. Commercial banks are also creating their own buffers through the ongoing recapitalisation.”
He added that the apex bank considered several factors in determining the new capital thresholds, including prevailing macroeconomic conditions, stress test results and the need for stronger risk buffers. He reassured on the regulator’s commitment to strict oversight as the consolidation progresses. “We will rigorously enforce our ‘fit and proper’ criteria for prospective new shareholders, senior management, and board members of banks, and proactively monitor the integrity of financial statements, adequacy of financial resources, and fair valuation of banks’ post-merger balance sheets,” Cardoso said. He said the CBN remained confident that the banking system would emerge stronger at the conclusion of the recapitalization exercise, with institutions better prepared to support Nigeria’s economic transformation Banks have up till March 31, 2026 to beef up their minimum capital base to the new standard set by the apex bank. Under the new minimum capital base, CBN uses a distinctive definition of the new minimum capital base for each category of banks as the addition of share capital and share premium, as against the previous use of shareholders’ funds.
While most banks have shareholders’ funds in excess of the new minimum capital base, their share premium and share capital significantly fall short of the new minimum definition. The CBN had in March 2024 released its circular on review of minimum capital requirement for commercial, merchant and non-interest banks. The apex bank increased the new minimum capital for commercial banks with international affiliations, otherwise known as mega banks, to N500 billion; commercial banks with national authorisation, N200 billion and commercial banks with regional license, N50 billion. Others included merchant banks, N50 billion; non-interest banks with national license, N20 billion and non-interest banks with regional license will now have N10 billion minimum capital. The 24-month timeline for compliance ends on March 31, 2026. Under the guidelines for the recapitalisation exercise, banks are expected to subject their new equity funds to capital verification before the clearance of the allotment proposal and release of the funds to the bank for onwards completion of the offer process and addition of the new capital to its capital base. The CBN is the final signatory in a tripartite capital verification committee that included the Securities and Exchange Commission (SEC) and the Nigeria Deposit Insurance Corporation (NDIC). The committee is saddled with scrutinising new funds being raised by banks under the ongoing banking sector recapitalisation exercise.

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