OPINION!!! Olayemi Cardoso’s Three Years And The 23% Rate Cut Test
Celebrating Nigeria’s latest inflation figures as proof that price stability has finally arrived is dangerously seductive. It has not.
No doubt, the Central Bank of Nigeria under Olayemi Cardoso can point to reforms, stronger external reserves, a more orderly foreign-exchange market, banking-sector recapitalisation, improved remittance flows, and moderating headline inflation, as reported. Those are measurable developments. But the increasingly celebratory accounts of Cardoso’s three years risk confusing improvement in macroeconomic indicators with victory over Nigeria’s cost-of-living crisis. That distinction matters.
A recent THISDAY assessment described Cardoso’s three years as a period in which the pursuit of price and exchange-rate stability “appears to be paying off”, pointing to headline inflation of 15.39 percent in August from 23.1 per cent at the beginning of the rebased CPI series in 2025, reserves of $54.08 billion, stronger remittances and improved international market perception.
Tribune Newspaper’s assessment similarly presented a catalogue of reforms spanning bank recapitalisation, foreign exchange, payments infrastructure, cybersecurity and external reserves.
But the headline numbers do not tell the whole story. Inflation has fallen. Prices have not. That is the first uncomfortable fact that must not disappear underneath the celebration.
The recent report by the National Bureau of Statistics shows a contradiction whereby the headline inflation was 15.39 per cent in August 2026, down marginally from 15.43 per cent in July. Yet, despite this moderation, the Consumer Price Index itself rose from 145.3 points in July to 146.3 points in August, underscoring a crucial distinction, which indicates inflation may be slowing, but the underlying price level is still rising. This development has continued to cause outcry and pain among Nigerians even as the annual inflation rate eased. In other words, the average price level continued to rise; it simply rose at a slower rate.
This is not semantics. It is the difference between telling Nigerians that prices are stabilising and acknowledging that the cost of living remains elevated.
Food inflation was still 19.57 percent year-on-year in August. Worse, the burden is not uniform. Lagos recorded headline inflation as high as 23.68 percent, while some other states recorded dramatically lower rates. Rural month-on-month inflation actually accelerated to 1.79 percent in August from 0.78 per cent in July.
Fairly, Nigerians would be forced to ask, which Nigeria are we talking about when we say price stability is paying off? The Nigeria of the financial markets? Or the Nigeria where a family still has to find more money to buy the same basket of food, pay rent, transport children to school and keep a business running?
That is the uncomfortable gap between macroeconomic stabilisation and household prosperity. The second problem is attribution.
The growth of external reserves to $54.08 billion is significant. But reserves are not created by monetary policy alone. THISDAY itself notes the role of oil receipts, remittances and changing capital flows in the broader external position. Tribune Newspaper similarly attributes the reserve improvement to a combination of higher oil receipts, tighter FX management, remittances and improved confidence.
Therefore, it is too convenient to transform every favourable external indicator into a personal performance certificate for the CBN governor.
The CBN deserves credit for reforms that fall squarely within its mandate. But oil production, global oil prices, diaspora behaviour, fiscal policy and broader investor sentiment are not variables that can simply be stamped “Cardoso achievement”.
The same caution applies to Nigeria’s improved credit ratings and renewed inclusion in international benchmarks. These are encouraging signals. But investor confidence is not the same thing as household welfare, and sovereign market access is not the same thing as affordable credit for a Nigerian manufacturer.
Cardoso inherited a deeply distorted foreign-exchange environment. The CBN subsequently moved toward a more market-driven FX regime, cleared verified obligations and tightened oversight of the Bureau de Change segment. THISDAY identifies these measures as part of the broader reform programme.
These are important institutional changes. But architecture is not outcome. A more transparent FX market does not automatically mean cheaper imported machinery. Higher external reserves do not automatically mean cheaper food. A stronger banking system does not automatically mean cheaper credit. And lower inflation does not automatically mean Nigerians can afford more. That is where the real test begins.
And now the CBN has created an even more interesting test for its own three-year narrative. On Tuesday, September 22, the Monetary Policy Committee cut the Monetary Policy Rate from 26.5 percent to 23 percent, a substantial 350-basis-point reduction, after holding the rate at 26.5 percent at its July meeting. The decision came against the backdrop of August inflation of 15.39 percent.
The apex bank reported the reset of the MPR to 23 percent as a recalibration of monetary policy in response to prevailing market realities. According to the available figures, this represents a substantial development. But the real test begins now. Will Nigerians actually feel it? That is the question.
For a manufacturer that has spent years paying punishing interest rates, the relevant question is not whether the CBN has reduced its benchmark. It is whether the commercial bank will reduce the cost of the loan. For a small business owner, it is whether working-capital financing becomes affordable enough to expand inventory. For a farmer, it is whether credit becomes cheaper enough to finance the next production cycle. For a household, it is whether access to financing becomes less expensive.
And for the economy, it is whether lower rates stimulate productive investment without reigniting the inflationary pressures that the CBN has spent the past three years fighting. That is why the 23 percent decision should not simply be added to Cardoso’s list of achievements. It should become the next test of his reforms.
The MPR is a policy signal. It is not the interest rate every Nigerian receives from a bank. Alongside the MPR cut, the MPC retained the cash reserve requirement for deposit money banks at 45 percent, merchant banks at 16 percent and non-TSA public-sector deposits at 75 percent. The Standing Lending Facility is now 23.5 percent and the Standing Deposit Facility 20 percent. That matters because the transmission from the CBN’s policy rate to actual lending rates is not automatic.
Banks still have funding costs, risk considerations, liquidity requirements and commercial decisions to make. Therefore, a 350-basis-point reduction at the policy level does not guarantee a corresponding 350-basis-point reduction in the cost of borrowing for businesses.
And this is where the celebration of falling inflation needs to meet the reality of the Nigerian economy. Private-sector credit can rise without affordable credit becoming widespread. Banks can become better capitalised without manufacturers obtaining cheaper loans. The naira can become more stable without imported inputs becoming cheap enough for struggling businesses. The financial system can become more resilient while households remain financially vulnerable. That is the contradiction Nigeria must confront.
Cardoso’s defenders are right about one thing: a central bank cannot build sustainable growth on runaway inflation. Price stability matters. Exchange-rate stability matters. Sound banks matter. Credible monetary policy matters. The problem is that price stability must eventually be experienced beyond the CBN’s statistical dashboard.
The CBN itself has emphasised the importance of monetary-policy transmission. Earlier this year, Cardoso launched the Nigeria Overnight Financing Rate, describing transaction-based benchmarks as important for improving price discovery, market transparency and monetary-policy transmission. THISDAY reported that Cardoso explicitly described effective monetary-policy transmission as a critical piece in delivering the CBN’s price-stability mandate.
That admission is important. Because transmission is precisely where the argument now moves. If the CBN has improved the monetary framework, the next question is whether the improved framework is transmitting into the productive economy.
Will businesses obtain cheaper capital? Will investment increase? Will manufacturers expand? Will production costs decline? Will businesses pass some of those savings to consumers? Will employment improve? Will household purchasing power recover? And can all of this happen without another inflationary outbreak?
These are far more consequential questions than whether the inflation rate has fallen from its previous peak. Nigeria’s households do not buy inflation rates. They buy rice. They pay school fees. They pay rent. They pay transport fares. They pay electricity bills.
Businesses do not operate on the MPR. They pay workers, suppliers, landlords, logistics companies, energy providers and banks. That is the lived economy. And that is why the difference between falling inflation and falling prices must remain central to the Cardoso debate.
Cardoso’s three years should therefore not be reduced to either triumph or failure. They should be measured against a harder standard.
Are Nigerians becoming more financially secure? Are productive businesses gaining access to affordable credit? Is monetary stability encouraging investment? Is purchasing power improving? Is the cost of doing business falling? And is the moderation in inflation becoming durable price stability rather than simply a slower rate of price increases? The 23 percent MPR now allows the CBN to answer those questions.
