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Recent evidence suggests that the Nigerian economy has entered 2026 with the weight of a hard-won stabilisation and rising structural fragility. This transition follows the Central Bank of Nigeria (CBN) implementation of several reforms since March 2023. Specifically, the CBN cleared the $7 billion backlog of verified foreign exchange obligations. Inherited in September 2023, settling the residual balance and announcing full clearance in March 2024, following an independent audit by Deloitte Consulting to verify the legitimacy of claims. The CBN also launched a banking sector recapitalisation programme in March 2024, requiring banks to meet substantially higher minimum paid-up share capital thresholds by 31 March 2026.” At the close of the programme, the Nigerian Securities and Exchange Commission (SEC) confirmed that 33 of Nigeria’s 37 banks had met the revised minimum capital requirements, with N4.65 trillion raised in aggregate.
It also allowed the naira to float under a unified, market-driven foreign exchange framework. In addition, the removal of the long-standing fuel subsidy to eliminate a structural fiscal drain also created conditions that generated substantial inflationary pressure.” Moreover, evidence indicates that the foreign exchange reserves recovered substantially, inflation began moderating after a substantial spike, and the manufacturing sector posted predominantly expansionary but uneven PMI readings throughout 2025.
However, analysis points out that Nigeria’s Central Bank now faces a dilemma that those reforms could not resolve. On the one hand, consistently raising monetary policy rates compounds and starves productive investment in real sectors already under severe structural constraints. On the other hand, cutting policy rates risks capital flight. In this light, this article argues that the interaction effects of the four unresolved structural failures in Nigeria’s financial sector, energy sector, manufacturing sector, and fiscal policy have made the monetary policy rate (MPR) a blunt and often less effective instrument.
