The Central Bank of Nigeria (CBN) has warned that persistent excess liquidity and expansionary election-cycle spending could undermine macroeconomic stability despite recent policy gains.
CBN Governor Yemi Cardoso issued the warning at the National Economic Council conference at the Presidential Villa on Tuesday, February 10, 2026.
The apex bank said improved exchange-rate conditions and tighter monetary policy were yielding results, but Nigeria’s recovery remains fragile and vulnerable to policy slippages. A sizeable liquidity overhang continues to pose risks of renewed inflation and currency pressure, while election-related spending historically weakens monetary policy transmission and reverses reform gains.
Cardoso said safeguarding price stability requires disciplined liquidity control, fiscal coordination and sustained structural reforms, stressing that monetary tightening alone cannot resolve deep structural constraints.
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“No central bank can sustainably deliver low and stable inflation alone where structural drivers such as food supply shocks, high energy costs and infrastructure deficits dominate price formation,” he said.
He disclosed that intervention programmes worth about ₦10.93 trillion provided temporary support but contributed to distortions that complicate liquidity management. Durable stability, he added, depends on fiscal discipline, supply-side reforms and institutional coordination.
The governor identified structural limits to monetary policy effectiveness, including weak credit transmission, shallow financial markets and a large informal sector. He noted that supply-side inflation drivers continue to blunt interest-rate impacts and that improved revenue mobilisation and efficient public spending are needed to reinforce stability.
Cardoso also emphasised the growing influence of subnational fiscal behaviour, noting that state governments now control roughly half of Federation Account revenues, giving them significant sway over liquidity conditions and growth outcomes.
He said higher revenues following reforms have expanded the macroeconomic impact of state-level decisions, adding that infrastructure investment could ease structural inflation pressures, while sustainable borrowing frameworks are needed to curb fiscal risks.
The CBN said policy coherence between monetary and fiscal authorities remains a key stability anchor, with disciplined interest-rate management complemented by stronger debt governance and public financial oversight.
Analysts said the warning reflects the apex bank’s determination to prioritise stability amid ongoing reforms aimed at strengthening the financial system and external resilience. Nigeria’s transition toward an inflation-targeting framework, expected gains from banking recapitalisation and rising non-oil inflows are seen as supportive, but structural vulnerabilities persist.
The bank maintained that stability gains remain contingent on coordinated fiscal restraint, disciplined liquidity management and sustained structural transformation.
