Monetary policy at crossroads: Two years after February 2024 reset

Executive Policy Brief

Today marks the second anniversary of the inaugural meeting of the Monetary Policy Committee (MPC) of February 2024 — a defining moment that initiated Nigeria’s most aggressive macroeconomic stabilization phase in recent history.

Two years later, it is both necessary and instructive to assess the conditions the MPC inherited, the decisions it took, the changes that followed, and most importantly, the policy choices now required in a fundamentally altered environment.

This assessment must answer three central questions:

• What conditions did the MPC inherit in February 2024?

• What has changed due to policy actions versus external adjustments?

• What policy recalibration is now required?

The Inherited Crisis Environment (February 2024)

At its inaugural meeting, the MPC confronted a severe and multi-dimensional macroeconomic crisis comprising three principal threats:

1. Foreign Exchange Crisis

Net foreign reserves stood at less than $4,000,000,000, reflecting a dangerously weak external buffer and severely compromised exchange rate stability.

Today, net foreign reserves stand at approximately $32,000,000,000, representing an eight-fold increase in just two years — a transformation that is nothing short of extraordinary.

This singular development has fundamentally altered Nigeria’s external stability profile.

It must be noted, however, that this improvement was driven largely by external and fiscal adjustments rather than direct monetary policy tightening alone.

2. Fiscal Crisis

The fiscal position was severely destabilized by over ₦20,000,000,000,000 in Ways and Means financing on the books of the Central Bank of Nigeria (CBN), which had significantly impaired monetary credibility and injected structural excess liquidity into the system.

This situation has now materially changed.

The current administration:
• Halted further Ways and Means financing, and
• Securitized the inherited stock.

As a result, this fiscal overhang has ceased to expand and has effectively exited the core monetary risk conversation.

Furthermore, although expansionary budgets continue to be announced:
• ₦55-Trillion projected expenditure for 2025, with actual spending closer to ₦25-Trillion
• ₦58-Trillion projected for 2026, with realistic expectations closer to ₦30-Trillion
• ₦40-Trillion projected revenue, with only a little over ₦10-Trillion realized

These realities demonstrate that the fiscal threat has substantially diminished due to execution constraints.

3. Inflation and Monetary Instability

Inflation was accelerating sharply in early 2024, driven by:
• Exchange rate collapse
• Excess liquidity
• Severe loss of confidence

The MPC responded appropriately with aggressive tightening during its first five to six meetings, followed by a holding phase, and subsequently modest easing.

The results have been decisive.

Inflation has consistently decelerated for 14 consecutive months, with the sole exception of a minor uptick in March 2025.

Food inflation has now fallen into single digits, while headline inflation stands at approximately 15%, with broad expectations of imminent transition to single-digit territory.

Exchange Rate Stabilization: From Collapse to Stability

The exchange rate, which had deteriorated dramatically from:
• ₦400/$ (official market)
• ₦800/$ (parallel market)

to a peak of ₦1,900/$, has now stabilized within the ₦1,000–₦1,300/$ range.

This represents a fundamental restoration of currency stability — previously the single greatest macroeconomic threat.

*Policy Actions Taken*

In recognition of improving conditions, the MPC:
• Reduced the Monetary Policy Rate (MPR) by 50 basis points in September 2025
• Eased the policy corridor in September and November 2025

Despite these actions, the broader policy stance remains highly restrictive.

Current key policy parameters include:
• MPR: 27%
• CRR: 45%

These levels were originally designed as emergency stabilization measures to:
• Prevent banking system liquidity from destabilizing the foreign exchange market
• Offset fiscal-driven excess liquidity

The Present Reality: A Fundamental Policy Mismatch

Today, the macroeconomic threats that justified extreme monetary tightening have largely receded:
• The forex crisis has been resolved.
• The fiscal crisis has been contained.
• Inflation is declining steadily.
• Exchange rate volatility has stabilized.

Yet monetary policy remains configured for crisis conditions.

Critically, market rates have already adjusted.

Treasury bill rates now stand approximately 1,000 basis points below the policy rate, indicating a clear disconnect between policy settings and market realities.

*The Strategic Policy Question Now*

The central policy question facing the MPC is no longer stabilization — it is normalization.

Specifically:

Should the MPC continue incremental adjustments to policy rates that are already misaligned with market conditions?

Or should it undertake a decisive normalization by dismantling the emergency monetary barricades inherited from the crisis period?

This raises concrete operational questions:

• Should the MPR be reset closer to the Treasury Bill rate, potentially within 25 basis points above or below market benchmarks?

• Should the CRR be significantly reduced or normalized, potentially toward historical levels seen during periods of stability, including the era following the tenure of Charles Soludo, when systemic liquidity risks were minimal?

*The Strategic Imperative*

The monetary framework currently in place was designed to defend a collapsing system.

That system has now stabilized.

Maintaining emergency settings in a normalized environment risks:
• Suppressing credit growth
• Constraining investment
• Slowing economic recovery
• Creating unnecessary policy distortion

The question before the MPC is therefore clear and unavoidable:

Should monetary policy remain configured for a crisis that no longer exists, or should it be recalibrated to support growth, credit expansion, and economic normalization?

*Conclusion*

Two years after the historic reset of February 2024, Nigeria’s macroeconomic landscape has undergone a profound transformation.

The original threats — forex instability, fiscal dominance, and runaway inflation — have been substantially contained.

The next phase of monetary policy must therefore transition from crisis defense to economic enablement.

The decisions taken now will determine whether monetary policy becomes a catalyst for growth — or an unnecessary constraint on recovery.

Ayo Teriba

CEO Economic Associates
24th February 2026