By OBI DAVIES

CBN Targets Single-Digit Inflation as Nigeria Pushes Reforms to Ease Economic Pressure

Inflation Declines, but the Cost-of-Living Challenge Remains

THE Central Bank of Nigeria (CBN) has pledged to sustain its monetary policy efforts until inflation falls to single digits, arguing that the recent decline in price increases, although significant, has yet to provide sufficient relief for struggling households.

CBN Governor Olayemi Cardoso made the commitment during an investors’ engagement on the sidelines of the 2026 International Monetary Fund and World Bank Annual Meetings in Bangkok, Thailand. He acknowledged that inflation had fallen from a peak of approximately 34 to 35 per cent to around 15 per cent. Nevertheless, he maintained that policymakers must not interpret the improvement as a reason to relax their efforts.

According to Cardoso, inflation disproportionately affects low-income households because it reduces purchasing power and makes essential goods, particularly food, increasingly difficult to afford.

He described inflation as one of the heaviest burdens on poor Nigerians and explained that the single-digit target reflected the government’s determination to achieve more sustainable price stability.

Although the decline represents progress, the governor’s remarks highlight a persistent economic challenge: lower inflation does not necessarily mean that prices have returned to previous levels. Rather, it means prices are rising more slowly than before. Consequently, many households may continue to struggle if food, transport, electricity and other essential expenses remain beyond their means.

Inflation Targeting & Monetary Policy Credibility

Beyond the numerical target, Cardoso said the CBN’s move towards inflation targeting would make monetary policy more transparent and predictable.

Under this approach, the central bank would communicate its inflation objectives more clearly, helping businesses, investors and households understand the direction of monetary policy. In turn, clearer communication could improve economic planning and reduce uncertainty surrounding borrowing, investment and pricing decisions.

However, the success of inflation targeting will depend on more than announcements. Monetary authorities must also sustain policy consistency, explain their decisions and assess how interest rates, liquidity conditions and foreign exchange developments affect economic activity.

Furthermore, Nigeria’s inflation challenge extends beyond monetary conditions. Food supply disruptions, transportation costs, energy prices, exchange-rate movements and structural weaknesses in agricultural production can all influence the cost of living.

Therefore, while tighter or more carefully calibrated monetary policy may help contain demand-side pressures, complementary measures will remain necessary to address supply constraints. Without those measures, price stability could prove difficult to sustain.

External Reserves & Exchange-Rate Stability

Cardoso also defended the wider economic reforms, pointing to stronger external reserves and relative stability in the foreign exchange market as important buffers against external shocks.

He said Nigeria’s external reserves had risen to their highest level in 18 years, strengthening the country’s capacity to withstand international economic disruptions, including the effects of geopolitical conflicts and uncertainty over trade tariffs.

In addition, he argued that relative stability and appreciation in the naira had helped moderate inflationary pressures. Exchange-rate stability can reduce the local-currency cost of imported goods and production inputs, although the extent of that benefit depends on how quickly businesses pass lower costs to consumers.

The governor also suggested that Nigerians would have faced more severe economic pressures without the reforms. However, the practical impact of these changes remains a central consideration for households that continue to experience high living costs.

Ultimately, stronger reserves and a more stable currency can support economic confidence. Yet their broader value depends on whether they contribute to more affordable goods, sustainable production and improved household welfare.

Government Turns to Agriculture & Electricity Reforms

At the same engagement, Finance Minister and Coordinating Minister of the Economy Taiwo Oyedele outlined plans to address structural problems affecting food production, electricity supply, business regulation and access to economic information.

He identified food prices as a major driver of inflation and said the government was preparing reforms to address challenges affecting agricultural production and food supply.

Such measures could help moderate food inflation if they improve farmers’ access to inputs, financing, storage, transportation and reliable markets. Nevertheless, their effectiveness will depend on implementation, coordination across government levels and the ability to overcome practical barriers facing producers.

Electricity reform also featured prominently in the minister’s remarks. Oyedele argued that Nigeria could not achieve its ambition of becoming a $1 trillion economy without reliable power.

He said the government was examining measures to improve electricity pricing, address transmission constraints and raise efficiency across the power sector.

Reliable electricity is critical to manufacturing, agriculture, retail and services. When businesses rely heavily on expensive alternative power sources, production costs rise, investment becomes more difficult and consumers may ultimately pay more for goods and services.

Consequently, improvements in electricity generation, transmission, distribution and pricing could support both industrial expansion and efforts to control production costs. However, the outcome will depend on whether proposed reforms translate into dependable power supply and a financially sustainable electricity market.

Regulatory Burdens & the Cost of Doing Business

Oyedele also warned that excessive regulation, unclear requirements and multiple charges were imposing substantial costs on businesses.

He argued that these burdens could discourage investment and reduce the resources available for expansion, innovation and employment. According to the minister, the combined economic cost of regulatory burdens could exceed the revenue generated by corporate income tax, personal income tax and value-added tax.

That comparison was presented as the government’s estimate and would require supporting data to assess its methodology and scope. Nevertheless, it highlights the administration’s concern that poorly coordinated rules can impose costs beyond the taxes and fees businesses formally pay.

To address the problem, the government is developing a framework intended to prevent agencies from introducing new rules, licences and charges without appropriate coordination.

If implemented transparently, such a framework could reduce duplication and help businesses plan their operations. At the same time, deregulation should not weaken legitimate safeguards for workers, consumers, public health or the environment.

The challenge, therefore, is to remove unnecessary administrative barriers while preserving effective regulation and accountability.

From Short-Term Capital to Long-Term Investment

The finance minister further said the government wanted to attract investors willing to establish factories, expand production and create jobs rather than concentrate primarily on short-term portfolio investments.

Long-term investment can strengthen productive capacity, generate employment and expand the supply of goods and services. However, investors generally require predictable policies, reliable infrastructure, access to foreign exchange and confidence that contractual and regulatory conditions will remain reasonably stable.

Oyedele cited the Economic Development Incentive, which offers tax credits to qualifying businesses, as part of the government’s strategy to encourage investment. He explained that eligible companies must meet specified conditions to receive the credits, an arrangement intended to improve accountability compared with incentives that rely solely on conventional tax holidays.

He also promised better access to reliable fiscal and economic data, including information on taxation, government revenue, employment and inflation. More consistent disclosure could help investors evaluate risks and make better-informed decisions.

Nevertheless, the ultimate test will be whether these measures generate productive investment, expand domestic capacity and create decent jobs rather than simply increase announced commitments.

Debt Management & Investor Confidence

Meanwhile, Director-General of the Debt Management Office Patience Oniha addressed concerns about the federal government’s borrowing plans for the fourth quarter of 2026.

She explained that planned borrowing would cover both the refinancing of maturing obligations and new financing requirements. The government, she added, would continue to monitor interest rates, market conditions and investor demand when determining the volume of securities to issue.

Oniha also said borrowing had increased following the passage of the 2026 budget, after comparatively slower issuance during the first two quarters of the year.

These decisions matter because government borrowing can influence interest rates, liquidity and the availability of funds for private-sector investment. However, refinancing maturing debt differs from borrowing to finance new expenditure, making it important for investors to understand the composition and purpose of each issuance.

Clear communication about borrowing volumes, debt-service obligations and market conditions could therefore strengthen confidence while helping investors assess Nigeria’s fiscal outlook.

Dangote Group Cites Policy Consistency as an Investment Factor

The Dangote Group also credited greater consistency and transparency in government policies with improving investor confidence and supporting business planning.

Its Chief Economist, Hassan Mammud, speaking on behalf of President Aliko Dangote, cited the group’s approximately $17 billion refinery investment as an example of the scale of commitment that predictable fiscal and monetary policies could support.

He also referred to incentives available to businesses operating in export-free zones and encouraged domestic and foreign investors to consider opportunities in Nigeria.

Furthermore, Mammud cited the group’s planned $20 billion refinery investment in Kenya as an example of its ambitions to expand across Africa.

The group’s experience offers an investor perspective on policy predictability. However, one company’s assessment cannot by itself establish that the wider business environment has become consistently favourable for all investors, particularly small and medium-sized enterprises that face different financing, infrastructure and regulatory constraints.

The Real Test: Better Living Standards

Cardoso concluded that the experiences shared by investors demonstrated the importance of credible and consistent policies in attracting capital. He urged stakeholders to help Nigerians understand the reforms and their intended benefits.

Yet public understanding must be accompanied by visible results. A stronger reserve position, a more stable exchange rate and lower inflation can create favourable conditions for growth, but households ultimately judge economic performance through food affordability, transport costs, electricity bills, wages and access to decent employment.

Moreover, the fall in inflation from approximately 35 per cent to around 15 per cent does not automatically reverse the cumulative increases in prices that occurred during the period of high inflation.

For the single-digit target to translate into lasting relief, monetary policy must work alongside improvements in food production, power supply, transportation, competition and business productivity.

Nigeria’s immediate challenge is therefore twofold: sustain progress towards price stability while ensuring that economic reforms improve the daily lives of ordinary citizens. Only when macroeconomic gains translate into greater purchasing power, productive employment and more affordable necessities will the benefits of the reforms become broadly tangible.