How Yemi Cardoso led CBN to global acclaim, By Toni Kan

Under the leadership of Governor Olayemi Cardoso, the Central Bank of Nigeria (CBN) has embarked on a comprehensive reform agenda, earning international recognition as the 2026 Central Bank of the Year. Appointed in September 2023, Cardoso inherited a financial landscape marred by foreign exchange volatility, high inflation, and a substantial backlog of foreign exchange obligations. His tenure has been marked by bold policy shifts, including the unification of exchange rates, aggressive monetary tightening, and a significant banking sector recapitalisation exercise. These reforms, firmly rooted in the CBN Act 2007 and the Banks and Other Financial Institutions Act (BOFIA) 2020, aim to restore monetary and price stability, enhance financial system resilience, and rebuild investor confidence, with notable progress in clearing FX backlogs and strengthening regulatory oversight.

The Central Bank of Nigeria (CBN), under the stewardship of Governor Olayemi Cardoso, has recently garnered significant international acclaim, being named the 2026 Central Bank of the Year by a leading global financial industry publication. This recognition underscores a period of profound transformation and decisive policy interventions aimed at stabilizing Nigeria's turbulent economic landscape. Since assuming office in September 2023, Governor Cardoso has confronted a complex array of challenges, including a fragmented foreign exchange market, persistent inflationary pressures, and a substantial backlog of foreign exchange obligations.

This article delves into the legal and regulatory underpinnings of the CBN's recent achievements, examining how the institution has leveraged its statutory mandate to implement critical reforms. It will explore the specific policy measures adopted, their alignment with existing legal frameworks, and the implications for legal practitioners navigating Nigeria's evolving financial sector. The thesis posits that the CBN's renewed commitment to orthodox monetary policy and institutional independence, coupled with robust regulatory enforcement, has been instrumental in repositioning Nigeria’s financial system for stability and growth.

The Central Bank of Nigeria's mandate is primarily derived from the Central Bank of Nigeria Act, 2007. This foundational legislation charges the Bank with the overall control and administration of the monetary and financial sector policies of the Federal Government. Its core objectives include ensuring monetary and price stability, issuing legal tender currency, maintaining external reserves to safeguard the international value of the Naira, promoting a sound financial system, and acting as banker and financial adviser to the Federal Government.

Further augmenting its regulatory powers is the Banks and Other Financial Institutions Act (BOFIA) 2020, which repealed and replaced earlier enactments. BOFIA 2020 significantly enhances the CBN's authority, particularly concerning the licensing, supervision, and regulation of banks and other financial institutions, including the expanded definition of Other Financial Institutions (OFIs) to encompass various fintech companies. This legal framework provides the CBN with broad discretion to determine and vary capital requirements for banks, issue directives, and enforce compliance, all crucial for maintaining systemic stability. Prior to Governor Cardoso's tenure, the Nigerian financial system faced significant distortions, characterized by multiple exchange rate windows, a substantial foreign exchange backlog, and a lack of transparency that eroded investor confidence and fueled inflationary pressures.

Under Governor Cardoso, the CBN has strategically deployed its statutory powers to address inherited macroeconomic imbalances. A cornerstone of the reforms has been the overhaul of the foreign exchange market. Leveraging its mandate to maintain external reserves and safeguard the international value of the Naira under the CBN Act, 2007, the CBN unified the multiple exchange rate windows into a single, willing-buyer, willing-seller framework. This move, supported by the introduction of the Electronic Foreign Exchange Matching System (EFEMS), aimed to enhance transparency and improve market efficiency, aligning with the CBN's regulatory functions over the foreign exchange market.

Furthermore, the CBN decisively tackled the over $7 billion backlog of foreign exchange obligations, a critical step in restoring credibility and boosting business confidence. The Bank also lifted restrictions on access to foreign exchange for 43 previously prohibited commodities, promoting market-driven exchange rates. More recently, the CBN revised its foreign exchange regulatory framework, introducing a N100 million penalty for banks processing FX transactions without adequate documentation, and tightening compliance requirements, as detailed in the Fourth Edition of the Foreign Exchange Manual. This demonstrates a robust application of the CBN's enforcement powers under both the CBN Act and BOFIA 2020.

In pursuit of monetary and price stability, a primary objective under Section 2 of the CBN Act, 2007, the CBN has adopted an aggressive monetary policy stance. This includes significant upward adjustments to the Monetary Policy Rate (MPR), which reached 26.75% in July 2024, and plans to introduce an Inflation Targeting Framework. The cessation of deficit financing through Ways and Means advances to the Federal Government, which had reached N22.7 trillion by 2023, marks a return to fiscal discipline and reinforces the Bank's core mandate. These actions are consistent with the CBN's role in formulating monetary and credit policy, as outlined in Section 12 of the CBN Act, 2007.

The banking sector has also seen significant regulatory interventions. The CBN initiated a banking sector recapitalisation programme, mandating new minimum capital requirements for banks by March 31, 2026. This initiative, grounded in the CBN's powers under BOFIA 2020 to prescribe capital requirements, aims to strengthen the sector against shocks and align it with the nation's economic growth objectives. The Securities and Exchange Commission (SEC) also played a crucial role, publishing a dedicated Recapitalisation Framework for the Banking Sector in June 2024, in line with the Investments and Securities Act. Furthermore, the CBN has proposed stricter guidelines on ring-fencing operations of closely linked entities and transactions between banks and their affiliates to protect depositors' funds and reduce systemic risks.

Beyond traditional banking, the CBN has extended its regulatory reach to the digital financial ecosystem. A recent directive mandates banks, fintechs, and other payment service providers to localize payment transaction data generated within Nigeria on local servers by January 1, 2027. This measure, alongside stricter ultimate beneficial ownership (UBO) disclosure obligations, aims to improve regulatory visibility, strengthen anti-money laundering efforts, and enhance consumer protection, aligning with the Nigeria Data Protection Act and the CBN's supervisory powers over OFIs under BOFIA 2020.

The Central Bank of Nigeria, under Governor Yemi Cardoso, has demonstrated a resolute commitment to restoring stability and confidence in Nigeria's financial system through a series of legally grounded and strategically implemented reforms. The international recognition received is a testament to the efficacy of these measures, which have addressed deep-seated issues in foreign exchange management, monetary policy, and banking sector resilience. For legal practitioners, these developments signify a more robust and transparent regulatory environment, demanding heightened compliance scrutiny and a thorough understanding of evolving CBN circulars and guidelines.

Looking ahead, practitioners should closely monitor the ongoing banking sector recapitalisation exercise, the implementation of the new foreign exchange manual, and the evolving regulatory landscape for fintechs, particularly concerning data localization and beneficial ownership disclosures. The CBN's emphasis on institutional independence, accountability, and adherence to orthodox monetary principles suggests a sustained trajectory of reform. Attorneys advising financial institutions and businesses operating in Nigeria must therefore prioritize proactive engagement with these regulatory changes to ensure compliance, mitigate risks, and capitalize on the opportunities presented by a more stable and credible financial system.