The Central Bank of Nigeria (CBN) has begun reaping the early fruits of its return to orthodox monetary policy, with improved reserve buffers and a modest return to profitability in 2024. However, beneath the surface of this institutional shift lies a sobering picture: soaring liquidity management costs, derivative settlement losses, and mounting operational expenses continue to exert pressure on the apex bank’s finances.
The CBN’s 2024 audited financial statement marks a critical juncture in Nigeria’s monetary history, as Governor Olayemi Cardoso’s leadership steers the institution away from a prolonged era of fiscal interventionism. The orthodox transition has yielded some gains — notably a drop in intervention lending, a rebound in external reserves, and improved investor sentiment — but not without exposing the expensive hangover from years of monetary-fiscal policy overlap.
When Governor Cardoso assumed office in 2023, he promised to restore credibility to monetary policy by abandoning unconventional tools and re-embracing inflation targeting, market-based interest rates, and exchange rate liberalisation. In his words, “The CBN did not embrace orthodox policies for a long period. We want to go back to the basics, and it will take us to where we want to go.”
This orthodoxy marked a shift from past years when the CBN actively engaged in direct development finance and monetisation of fiscal deficits — moves critics say muddied the bank’s monetary focus.
In the 2024–2025 policy framework, the CBN committed to a full inflation-targeting regime, enhanced transparency, and forward guidance — all essential hallmarks of credible central banking. The financial year 2024 was the first to reflect the full impact of these reforms.
One of the starkest outcomes of this policy reset is the 26% reduction in the CBN’s loans and receivables portfolio — from N16.1 trillion in 2023 to N11.9 trillion in 2024. This contraction underscores the bank’s move away from direct intervention schemes that previously funnelled credit into sectors such as agriculture and manufacturing.
While supporters argue the rollback is necessary to restore discipline and allow commercial banks to reclaim their role in credit intermediation, critics warn that in the absence of robust fiscal policy, such interventions had once served as vital economic stabilisers — particularly during crises like COVID-19 and the oil price slump.
The shift to orthodox management has also buoyed Nigeria’s external reserves, which rose from N29.98 trillion in 2023 to N54.73 trillion in 2024. A major driver was the revaluation of the CBN’s gold holdings — valued at N2.77 trillion in 2024 from N1.28 trillion the year before — reflecting global price appreciation rather than volume increases.
The apex bank also credited improved coordination with the Nigerian National Petroleum Company Limited, stronger diaspora remittances, and prudent investment strategies for the reserve boost. Gold now constitutes over 5% of Nigeria’s external reserves, up from 4.3% a year earlier.
Despite this progress, analysts caution that Nigeria’s reserves remain susceptible to oil volatility, import reliance, and global tightening. Without diversified non-oil exports and stronger local production, these gains may not be sustainable.
Perhaps the most alarming detail in the CBN’s 2024 report is the exponential rise in liquidity management costs — which skyrocketed 200% from N1.5 trillion in 2023 to N4.5 trillion in 2024. This surge stems from the apex bank’s aggressive open market operations and frequent issuance of OMO bills and Treasury Bills to drain excess liquidity and rein in inflation.
The bank’s inflation fight saw it raise the Monetary Policy Rate (MPR) multiple times, peaking at 27.5%, the highest in recent history. However, the financial toll of this strategy raises questions about long-term fiscal sustainability.
In addition, the CBN’s expenses on currency printing and distribution surged by 306% — from N77.67 billion in 2023 to N315.18 billion in 2024 — due in part to lingering effects of the controversial naira redesign. The redesign, initiated in 2022, continued to impose logistics and stabilisation costs well into 2024.
The CBN recorded a notable financial turnaround, posting a standalone surplus of N165.69 billion in 2024, compared to a N1.27 trillion loss in 2023. On a group level, it achieved a modest net profit of N38.84 billion.
Total assets jumped to N117.6 trillion, up from N87.88 trillion, and liabilities rose to N116.59 trillion. But total group equity shrank to N728.24 billion from N882.42 billion, revealing underlying fragility despite headline gains.
Income from domestic investments grew to N4.3 trillion, and other interest income surged to N801.26 billion due to revaluations. However, interest expenses ballooned to N4.98 trillion — up from N1.75 trillion — reflecting the cost of mopping up liquidity.
Net interest income dropped sharply to N122.91 billion from N2.2 trillion, while the group recorded a massive N13.88 trillion loss on derivative settlements, nearly double the N6.25 trillion loss in 2023. These settlements were aimed at clearing FX forward contract backlogs, necessary for restoring market confidence, but highlight the lingering effects of past mismanagement.
Financial experts have acknowledged the positive direction of CBN reforms, while warning of the steep costs still being incurred. Chief Economist at SPM Professionals, Paul Alaje, praised the CBN for improving policy transparency and restoring a measure of credibility.
“Expense discipline and clear policy direction are welcome changes,” Alaje said. “But the derivative losses and cost of liquidity management underscore that we are still clearing past financial distortions.”
Economist Dr. Aliyu Ilias echoed the sentiment, stating that while orthodox reforms are a step in the right direction, success depends on consistent implementation and responsiveness to market realities.
“The CBN must adopt a balanced approach. Orthodoxy is good, but market needs must guide policy,” Ilias said.
The Central Bank’s 2024 financial results reflect the early impact of policy redirection — modest profitability, stronger reserves, and reduced interventionism. However, the report also makes clear that Nigeria’s central bank is still contending with the financial and operational scars of its recent past.
The year ahead will test the CBN’s commitment to sustaining orthodox reforms while managing the economic fallout of past policies. With global financial conditions tightening, oil revenues under pressure, and inflation still elevated, the cost of recovery may yet rise further.
The CBN’s return to monetary orthodoxy has laid a foundation for policy credibility, but sustaining momentum requires managing costs, deepening structural reforms, and avoiding the temptation of policy backsliding.