Cardoso, the Naira and the Effort to Sanitize FOREX Market
By Zekeri Idakwo Laruba
For much of the last two years, Nigeria’s foreign exchange market faced not only a shortage of dollars, but a deeper crisis of confidence. The naira came under intense pressure, businesses struggled to plan, investors delayed decisions, and households bore the burden of rising prices. At the peak of the turbulence, the challenge before the Central Bank of Nigeria was not simply to inject liquidity into the system, but to restore trust in the market.
That restoration effort relied heavily on communication. Under Governor Olayemi Cardoso, the CBN increasingly combined policy action with deliberate messaging, using Monetary Policy Committee meetings, public statements, and engagement with investors, banks, Bureau De Change operators, and international institutions to calm nerves and shape expectations.
When Cardoso assumed office, he made it clear that confidence would return only through reforms rooted in transparency and discipline. He repeatedly stated that the era of multiple exchange rates, opaque interventions, and market distortions had to end. In several public remarks, he stressed that the bank would focus on rebuilding credibility, clearing foreign exchange backlogs, strengthening reserves, and allowing market forces to play a greater role in price discovery.
Those comments mattered because Nigeria had for years operated a system where the naira was heavily supported through administrative controls. Different exchange windows existed, access to dollars was often selective, and the official rate frequently diverged from the parallel market rate. The arrangement created an impression of stability, but it also encouraged speculation and rent-seeking. Those who obtained dollars cheaply through official channels could profit by selling elsewhere at higher rates.
In practical terms, Nigeria was sustaining an artificial value for the naira. Like the old fuel subsidy regime, it came with hidden costs. Foreign reserves were strained, investor confidence weakened, and productive sectors often struggled to access foreign exchange on time.
When reforms began, the transition was difficult. Exchange rate unification exposed pent-up demand and triggered fresh volatility. The naira weakened sharply, and public anxiety grew. It was during this phase that the CBN’s communication strategy became central.
At successive MPC meetings, the apex bank raised interest rates aggressively to combat inflation and support macroeconomic stability. But beyond the numbers, the statements after each meeting were equally important. The committee consistently reaffirmed its commitment to restoring price stability, reducing inflationary pressures, and improving confidence in the foreign exchange market.
Cardoso also used international platforms to reassure investors. At meetings with foreign portfolio investors and development partners, he emphasised that Nigeria was open for business and committed to orthodox reforms. He noted that outstanding FX obligations inherited by the bank were being cleared and that new systems would improve transparency in the market.
The Minister of Finance and Coordinating Minister of the Economy, Wale Edun, repeatedly echoed the same reform message, arguing that exchange rate adjustments and monetary tightening were painful but necessary steps toward long-term stability. The alignment between fiscal and monetary authorities helped reduce the perception of policy contradiction that had hurt confidence in previous years.
Stakeholders in the banking and investment community also responded positively as communication became clearer. Analysts noted that regular guidance from the CBN reduced uncertainty and helped the market better understand policy direction. Predictability, even during painful reforms, was preferable to silence or mixed signals.
The Bureau De Change segment also became part of the broader stabilisation effort. BDC operators, through their associations, called for special allocations and deeper engagement with the CBN to improve retail-end liquidity. While their role had previously been controversial, the bank signalled a preference for stricter regulation and a more structured role for licensed operators.
One of the quiet successes of the reform period has been the reduction in opportunities for arbitrage. As exchange rates became more market-reflective and transaction systems more transparent, the old incentives for round-tripping narrowed. While malpractice has not disappeared entirely, the room for easy gains through privileged access has significantly reduced.
There are early indicators of progress. Improved investor sentiment, stronger external inflows, better reserve conditions, and a calmer foreign exchange market suggest that the worst phase of the panic may have passed. The naira still faces pressures, but the market is no longer operating in the same climate of confusion and fear.
The broader lesson is that central banking is not only about interest rates and reserves. It is also about credibility. In moments of crisis, words backed by consistent action can steady markets as effectively as direct intervention.
Nigeria’s foreign exchange reforms remain unfinished, and citizens still await the full benefits in lower prices and stronger purchasing power. Yet one fact stands out from this difficult chapter: when the storm was fiercest, the CBN did not rely on policy tools alone. It also used communication to calm the market, restore direction, and rebuild trust.