Nigeria Central Bank to Cut Fiscal Role, Focus on Advice

Nigeria's central bank will scale back its direct fiscal interventions and focus on providing evidence-based policy advice to the government, its governor said on Tuesday. 

Olayemi Cardoso, who took over in September after his predecessor Godwin Emefiele was sacked and arrested, said the bank's new role would help to restore the credibility and independence of the central bank as the monetary authority and lender of last resort. 

The central bank under Godwin Emefiele, the former governor, had been heavily involved in direct fiscal interventions, such as disbursing loans to various sectors, providing foreign exchange to importers and subsidising local production of rice and other commodities. These interventions, which were seen as supportive of the economic agenda of Muhammad Buhari, the former president, had drawn criticism from some analysts and investors who accused the bank of overstepping its mandate, crowding out the private sector and distorting the market. 

"There is need to pull the central bank back from direct development finance interventions into more limited advisory roles that support economic growth," Cardoso told Reuters in an emailed speech.

Mr Cardoso hinted the bank would continue to pursue its objectives of price stability, exchange rate stability, financial system stability and economic growth, but would do so through more conventional monetary policy instruments such as interest rates, reserve requirements and open market operations. 

The appointment of Mr Cardoso, a former CitBank Nigeria Ltd. chairman, was welcomed by many in the business community as a sign of a more orthodox and market-friendly economic policy under Bola Ahmed Tinubu, the new president. Since taking office in May, Mr Tinubu has also cut fuel subsidies, signed a new act to boost electricity generation, and unified multiple exchange rates as part of reforms aimed at unlocking growth and investments.

Nigeria, Africa’s largest economy, is recovering from a recession caused by the COVID-19 pandemic and a slump in oil prices, its main source of revenue. The International Monetary Fund has forecasted that the country’s economy will expand by 3.1% in 2024, up from 2.9% in 2023, on the back of President Bola Tinubu’s reforms.