How CBN rebuilt MPC credibility after Nigeria’s currency crisis

The Central Bank of Nigeria (CBN) strengthened the role of independent-minded external members of its Monetary Policy Committee (MPC) to reduce groupthink and rebuild investor confidence following the country’s currency crisis, Olayemi Cardoso, governor of the CBN, has said.

Speaking during a panel session titled ‘How Central Banks Decide—Committee Decision-Making and Communication in an Era of Uncertainty’, at the ongoing IMF and World Bank Group Annual Meetings in Bangkok, Thailand, Cardoso said the bank deliberately sought independent-minded members whose perspectives would strengthen deliberations and improve the credibility of monetary policy decisions.

He said the CBN was operating in a difficult economic environment when the new administration took office, with the country facing a currency crisis, a loss of investor confidence and broader economic challenges.

Under those circumstances, Cardoso said, restoring confidence required measures that would deliver lasting and fundamental improvements rather than temporary relief.

“Under such a scenario, it was very important, it was critically important, that whatever it is we do to restore confidence has got to be one that endures and is impactful,” he said.

“Fundamental to that was ensuring that the outside independent members of the MPC were strong, well-recognised, independent-minded people so that the risk of groupthink was significantly reduced.”

According to the CBN governor, the participation of external members brought different perspectives to monetary policy deliberations, challenging assumptions that internal officials might otherwise take for granted because of their daily exposure to the bank’s data and established practices.

He said this diversity of views had strengthened the quality of debate within the committee at a critical period in Nigeria’s transition from crisis to stability.

“The rigour of debate tends to be a lot stronger, in my view,” Cardoso said.

The governor’s remarks highlight the importance of institutional credibility and independent scrutiny in monetary policy decision-making, particularly when central banks are seeking to restore confidence after periods of economic instability.

Cardoso also explained that the CBN had introduced measures to ensure external members could participate meaningfully in deliberations rather than being brought into discussions only when policy decisions were imminent.

He said members receive relevant data ahead of meetings and have opportunities to interrogate the information, question the MPC secretariat and conduct scenario analysis before reaching their positions.

The bank also provides resources to external members and, where necessary, allows them to engage specialists outside the institution. Cardoso said regular retreats and engagements with experts from other jurisdictions further expose members to different perspectives and policy experiences.

He added that external members were involved from the beginning in the CBN’s efforts to move towards inflation targeting, rather than being presented with decisions after internal officials had already completed their work.

According to him, the process is designed to ensure that all members have access to the information needed to assess policy options independently.

Cardoso said the approach was part of a broader effort to strengthen transparency and rebuild the credibility of both the MPC and the central bank after the economic crisis.

He noted that external members sometimes questioned why certain information had not been made public when they believed greater transparency was necessary.

“For us, we were coming in at a time of crisis,” he said, adding that the actions taken afterwards were essential to establishing the credibility of the MPC and the CBN.

The governor also explained how the committee manages disagreements during deliberations, arguing that members must first establish areas of agreement before turning to contentious issues.

He said beginning discussions with disagreements could consume valuable time and distract the committee from issues on which members already share a common position.

Using Nigeria’s monetary policy transmission mechanism as an example, Cardoso said MPC members recognised that the mechanism was not working effectively, allowing the committee to focus its discussions on how to address the problem.

He also cautioned against allowing developments in other economies to overshadow Nigeria’s domestic economic realities, noting that the country’s inflation cycle differed from that of many other economies because foreign exchange reforms and the removal of fuel subsidies occurred at different stages.

Cardoso said effective leadership of the committee was therefore necessary to keep deliberations focused on the conditions facing Nigeria at the time.

On communication, he said the CBN had placed considerable emphasis on explaining the reasoning behind policy decisions, particularly when those decisions surprised the market.

He said the bank’s September decision to cut the monetary policy rate was supported by improving macroeconomic conditions, including declining inflation, stronger external reserves and continued economic growth.

Cardoso said the CBN used its post-MPC engagement with the press to explain the economic developments leading to the decision, the challenges the country had faced and the conditions that created room for a policy adjustment.

He acknowledged that the decision initially surprised market participants but said the explanation helped them understand the reasoning behind the move, particularly the need to address weaknesses in monetary policy transmission.

“To do such a thing successfully, you must have an element of credibility with the market,” he said.

“The market must have consistently seen you over a period of time doing things in the right way and believe they can put their trust in you.”

The CBN cut its monetary policy rate by 350 basis points to 23 percent at its September 2026 MPC meeting, while retaining the cash reserve ratio for deposit money banks at 45 percent.

Cardoso’s remarks at the Bangkok meeting underscore the central bank’s emphasis on independent scrutiny, transparency and effective communication as it seeks to sustain confidence in monetary policy and strengthen the transmission of its decisions to the wider economy.