Business
Economic Recovery: ‘Monetary Policy Offers Limited Tools’
Governor of Central Bank of Nigeria (CBN), Mr. Godwin Emefiele says monetary policy offers limited tools for dealing with the current economic challenges in the country.
Emefiele said this while delivering a keynote lecture at the 2017 Annual Conference of Nigerian Bar Association (NBA) in Lagos.
The lecture was titled “The Dilemma of Monetary Policy During a Recession: Potential Options for Nigeria”.
Emefiele identified the current challenges facing Nigeria as falling Gross Domestic Products (GDP) growth rate, rising inflation, persistently high interest rates, falling foreign exchange reserves and depreciating exchange rate.
He said the CBN could not tackle these challenges with the tool available to it with the objective of changing the outcomes for the better.
The governor pointed that CBN had always used monetary policy implementation at its disposal in controlling interest rates and money supply to moderate inflation and achieve economic growth.
Emefiele said these problems occurred simultaneously and needed to be dealt with over a short period of time.
According to him, the real dilemma the country is faced with is that there are significant trade-offs in outcomes of economic variables regardless of what specific monetary policy the nation implemented.
“For example, one would expect that given the bank’s core mandate to pursue low inflation, the central bank would implement policies geared towards that.
“In order to tackle high inflation, the correct monetary policy would be to tighten money supply either by increasing the Cash Reserve Requirement (CRR) of banks, mopping up money through increased Open Market Operations or raising the Liquidity Ratio of banks.
“While doing any or a combination of these would help moderate inflationary pressure, it could ensure that interest rates remain high and may even be inimical to restoring economic growth in the short term.
He, therefore, said that bank would need the support and cooperation of the NBA to build synergy towards the achievement of the various policy options enumerated.
According to him, the CBN is leading other stakeholders through the Financial System Strategy 2020 (FSS2020) in order to achieve stability in the financial system.
He said this would help to develop a robust, globally competitive and market friendly legal framework for Nigeria’s financial sector by the year 2020.
“FSS 2020 intends to apply the instrumentality of the law as a vehicle to fast-track the development of Nigeria’s financial system.
“As such, this is one area where the CBN would need the support of the NBA.”
Emefiele said that one of the major lessons learnt from the recent global financial crises was the need to develop adequate frameworks and appropriate tools for managing financial stability.
“In this regard, the Financial Services Regulation Coordinating Committee led by the CBN, is putting together a robust framework that will adequately promote stability of the Nigeria’s financial system.
The governor also said that it was imperative that the NBA should be ready and willing to partner with the CBN in areas like legislative advocacy.
He said this would ensure quick promulgation of robust legislations in support of chosen policy options and vigorous support for establishment of commercial courts to facilitate speedy resolution of commercial disputes.
Others, he said, were provision of constructive inputs for the development of robust financial sector legislative bills and other regulations and checkmating unbridled recourse to the use of interlocutory applications to frustrate legitimate expectations in commercial and financial disputes to contribute.
He urged every Nigerian to contribute his or her quota to national development.
“I am not unaware of the short-term pains we are all going through right now. But gold glitters after it has gone through enormous heat.
“Let us, therefore, use this opportunity to look inwards, diversify our economy, produce locally, and create jobs for our unemployed youths.
“Even when we disagree about the way forward, we should do so in good faith and never lose sight of what is important.
“We should remain resolutely committed to the course and be motivated by the achievability of our desire to strengthen our economic fundamentals.”
The Central Bank of Nigeria (CBN) yesterday said 33 banks have met new minimum capital requirements under its recapitalisation programme, raising a combined N4.65 trillion to strengthen the financial system.
The apex bank disclosed this in a statement marking the end of the exercise, which commenced in March 2024 and drew participation from domestic and foreign investors.
The statement was jointly signed by the Director of Banking Supervision, Olubukola Akinwunmi, and the Acting Director of Corporate Communications, Hakama Sidi-Ali.
The statement said “Over the 24-month period, Nigerian banks raised a total of N4.65tn in new capital, strengthening the resilience of the financial system and enhancing its capacity to support the economy.”
The regulator said local investors accounted for 72.55 per cent of the funds, while international investors contributed 27.45 per cent, reflecting continued confidence in the sector.
Commenting on the outcome, the CBN Governor, Olayemi Cardoso, said in the statement, “The recapitalisation programme has strengthened the capital base of Nigerian banks, reinforcing the resilience of the financial system and ensuring it is well-positioned to support economic growth and withstand domestic and external shocks.”
It added that while 33 banks have complied with the new thresholds, a few others are still undergoing regulatory and legal processes.
The statement noted, “The CBN confirms that 33 banks have met the revised minimum capital requirements established under the programme.
“A limited number of institutions remain subject to ongoing regulatory and judicial processes, which are being addressed through established supervisory and legal frameworks.
“All banks remain fully operational, ensuring continued access to banking services for customers.”
The apex bank stressed that the exercise was executed without disrupting banking operations, ensuring uninterrupted access to services nationwide.
It further stated that key prudential indicators have improved, particularly capital adequacy ratios, which remain above global Basel benchmarks.
The minimum ratios were set at 10 per cent for regional and national banks and 15 per cent for banks with international licences.
The bank also said the recapitalisation coincided with a gradual exit from regulatory forbearance, a move it said improved asset quality, strengthened balance sheet transparency, and enhanced overall stability.
To preserve these gains, the CBN said it has reinforced its risk-based supervision framework, mandating periodic stress tests and adequate capital buffers for banks.
It added that supervisory and prudential guidelines would be reviewed regularly to strengthen governance, risk management, and resilience across the sector.
“The successful completion of the programme establishes a stronger and more resilient banking system, better positioned to support lending, mobilise savings, and withstand domestic and global shocks,” the statement said.
The Tide learnt that foreign capital inflows into Nigeria’s banking sector rose by 93.25 per cent year-on-year to $13.53bn in 2025, up from $7.00bn recorded in 2024, amid the ongoing recapitalisation drive by the Central Bank of Nigeria.
Data from the National Bureau of Statistics capital importation report showed that the banking sector remained the dominant destination for foreign capital, accounting for $13.53bn of the total $23.22bn recorded in 2025, representing 58.26 per cent of total inflows, up from 56.81 per cent in 2024.
The surge reflects heightened investor interest in Nigerian banks as they raised fresh capital to meet new regulatory thresholds introduced by the apex bank, with industry-wide recapitalisation activities driving large-scale inflows across all quarters of the year.
However, the Centre for the Promotion of Private Enterprise (CPPE) recently raised concerns over weak credit flows to small businesses despite recent banking sector reforms.
The CPPE, led by a renowned economist, Dr Muda Yusuf, acknowledged that the ongoing bank recapitalisation exercise by the CBN has strengthened the financial system, but warned that the benefits have yet to translate into meaningful support for the real economy.
The facility will be disbursed through participating Microfinance Institutions (MFIs), which will in turn extend the loans to their customers, particularly SMEs, as they directly interface with businesses at the grassroots level.
The Executive Director of COMCIN, Mr. Micheal Ogbaa who represented the Chairman, Dr. Iredele Oyedele (FCA, FCCA), said the initiative is designed to strengthen micro-lending institutions and expand access to finance for grassroots entrepreneurs, particularly women and youths in the informal sector.
Ogbaa explained that COMCIN does not lend directly to individuals but works through its network of microfinance and cooperative institutions, which in turn provide loans to end users.
“We came together to advocate for the microfinance ecosystem. Commercial banks often exclude people at the grassroots, but our members are positioned to reach them. This facility will empower them to do more,” he said.
He noted that the loan scheme offers low interest rates and flexible repayment plans, making it more accessible to small business owners.
According to him, about 90 percent of beneficiaries are expected to be women, who play a key role in sustaining families and driving economic activities at the local level.
“Our focus is on traders, service providers, and players in the informal sector. These are the real movers of the economy. By supporting them, we are strengthening families and contributing to national development,” he added.
Ogbaa disclosed that eligible SMEs with proven integrity and business track records could access up to N5 million each through participating micro-lending institutions. The rollout has commenced in Lagos and will extend to Abuja, Enugu, and other regions, including the South-West, South-East, and North-East.
He said 12 micro-lending institutions have already benefited from the scheme, while 85 applications are currently being processed under the pilot phase.
“Our target is to reach at least 100,000 SMEs nationwide. We are building a platform that connects funding partners with credible micro-lending institutions, creating a reliable channel for financial inclusion,” Ogbaa said.
He added that COMCIN is also working to attract larger funding pools from development finance institutions and private investors, noting that successful implementation of the pilot phase would boost confidence and unlock more capital for SMEs.
“We have seen encouraging testimonies from early beneficiaries. As we demonstrate transparency and efficiency, more institutions will be willing to channel funds through us,” he said.
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