High FAAC Raises Inflation Concerns – Cardoso

The Governor of the Central Bank of Nigeria (CBN), Olayemi Cardoso, has expressed concern over the inflationary implications of rising liquidity levels in the banking system, warning that increasing statutory revenue disbursements through the Federation Account Allocation Committee (FAAC) could undermine the Bank’s disinflation efforts if not counterbalanced by tighter monetary conditions.

This is according to his personal statement made after the 300th Monetary Policy Committee (MPC) meeting held on May 20, 2025, and published on the CBN website over the weekend.

The personal statement read, “We are also confronted with increased liquidity injections into the banking system from statutory revenue distributions, highlighting the need for tight monetary conditions to avoid renewed inflationary pressures.”

His remarks reflect growing concern within the apex bank about how elevated cash inflows from oil revenue and exchange rate gains are feeding naira liquidity across the system.

The CBN maintained its benchmark Monetary Policy Rate (MPR) at 27.5% during the meeting, holding all other parameters constant. While recent data shows a gradual easing of inflation, the MPC noted that underlying risks persist, particularly from energy price hikes, structural constraints, and exchange rate pressures.

SOURCE: Nairametrics