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Special Report
The Central Bank of Nigeria (CBN) is strengthening regulatory effectiveness in the financial services sector through sweeping structural reforms. Its latest policies expand supervisory frameworks, clarify institutional responsibilities, and extend oversight beyond core prudential issues to cover non-prudential concerns such as governance, consumer protection, and market conduct, as well as emerging risks like cyber threats and fintech disruptions. With new compliance directives to banks, Payment Service Banks, and Other Financial Institutions, the apex bank aims to entrench stronger regulatory discipline and broaden industry-wide accountability, reports Assistant Editor COLLINS NWEZE
The Nigerian financial sector has, for years, needed stability and robust regulatory oversight to thrive. Central to this mission is the Central Bank of Nigeria (CBN), whose statutory role includes ensuring sound banking practices and safeguarding financial stability through effective surveillance.
Empowered by the Banks and Other Financial Institutions (BOFIA) Act of 2020, the CBN also bears responsibility for promoting an efficient payments system anchored on a resilient financial architecture. To achieve this, the apex bank routinely issues policies and regulations that entrench strong oversight, uphold prudential standards, and foster confidence in the system. Beyond its core supervisory functions, the CBN has consistently played a developmental role, extending its influence across critical sectors of the economy—including finance, agriculture and industry. These broad mandates are executed through its specialised departments, ensuring that the bank’s objectives are pursued with precision and impact.
Under the leadership of Governor Olayemi Cardoso, the Bank has sharpened its focus on economic reforms and targeted policies designed to restore macroeconomic stability. Through transparent market operations, improved coordination between monetary and fiscal authorities and deliberate measures to rebuild public trust, the CBN is working to stabilise the exchange rate, curb inflation, strengthen banks’ capital buffers, and create an enabling environment for both businesses and individuals to succeed.
Equally important is the promotion of ethics and professionalism within the financial system. Recognising that the integrity of bankers and treasurers is fundamental to market stability, the CBN has introduced the FX Global Code to guide authorised dealers and market participants. This initiative underscores the Bank’s commitment not only to prudent regulation but also to embedding international best practices in Nigeria’s financial markets. “At the Central Bank, we have intensified surveillance of market activities to ensure compliance and eliminate bad actors who attempt to undermine the system. Together, we must build a market based on strong governance and transparency. As regulators, we will maintain a zero-tolerance approach to compliance violations,” he said.Last week, the apex bank expanded the mandate of its newly created Compliance Department. In a circular to banks, Payment Service Banks, and Other Financial Institutions, the apex bank announced that the department, established in the first quarter of this year, will now oversee four key areas. These include Financial Crime Supervision (AML/CFT/CPF and sanctions compliance), Market Conduct Supervision (disclosure practices, complaints frameworks, advertising standards), Enterprise Security Supervision (cybersecurity, data protection, third-party risk management), and Corporate Governance and ESG Supervision (board effectiveness, ESG oversight). Director Olubunmi Ayodele-Oni said the move aims to enhance surveillance and global best practices.
“When operations commenced in Q2 2025, responsibility for the oversight of non-prudential risk areas was formally reassigned to the Department. This structural reform forms part of the Bank’s broader efforts to consolidate and embed regulatory effectiveness within existing supervisory frameworks, clarify institutional responsibilities, and maintain focused oversight of non-prudential and emerging risks,” it said.
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The apex bank explained that, henceforth, all regulatory reports, correspondence and related enquiries concerning these matters should be directed to the Director, Compliance Department through the established communication channels. “Financial institutions will receive direct communication from the Department regarding specific points of contact and submission procedures. The CBN looks forward to continued cooperation from all institutions in ensuring a smooth transition and in upholding the highest standards of compliance with applicable regulatory requirements,” it stated.
What the apex bank is doing
According to Cardoso, the banking sector remains robust with key indicators reflecting a resilient system. “The non-performing loan ratio remains within the prudential benchmark of five per cent, showcasing strong credit risk management. The banking sector liquidity ratio comfortably exceeds the regulatory floor of 30 per cent, a level which ensures banks are maintaining adequate cash flow to meet the needs of customers and their operations. The recent stress test conducted also reaffirmed the continued strength of our banking system,” he said.
Also, to ensure that the banking system can effectively support the growth of the nation’s economy, efforts to strengthen banks’ capital buffers were announced in 2023 with a two-year implementation window. According to him, the banking sector remains in a strong position to support Nigeria’s economic recovery by enabling access to credit for MSMEs and supporting investment in critical sectors of our economy. In the same vein, he said Other Financial Institutions (OFIs) hold significant potential to drive productivity and economic growth by expanding access to credit and financial services for underserved individuals and businesses.
“To unlock this untapped potential, we aim to strengthen key institutions—particularly Primary Mortgage Banks (PMBs) and Microfinance Banks (MFBs)—to enhance their efficiency and impact. Our strategy includes implementing model mortgage foreclosure laws to stimulate lending and reduce delinquency, integrating PMBs and MFBs into the GSI platform to minimise non-performing loans, and leveraging Development Finance Institutions (DFIs) more effectively to provide increased on lending facilities to well-managed OFIs,” he added.
Entrenching efficiency, best practices
At the unveiling of the Central Bank of Nigeria’s (CBN) 2024–2028 Strategic Plan at the Bank’s headquarters, Governor Cardoso outlined the vision of the institution: to be a trusted and respected central bank that promotes confidence in the economy. He explained that this would be driven by five strategic themes carefully designed to address the nation’s most critical economic and financial challenges.
The first theme, Price Stability and Monetary Policy Effectiveness, will anchor the Bank’s resolve to leverage established monetary policy instruments, supported by rigorous data analysis, to maintain price stability. The second, Robust and Resilient Financial System, focuses on strengthening the financial sector while embedding financial inclusion objectives into policy design to broaden access to affordable products that support sustainable growth. Cardoso added that the third theme, Governance, Compliance and Advisory Partner to the Federal Government, reflects the CBN’s commitment to act as a transparent, reliable, and trusted advisor in shaping economic policies. Recognising the critical role of people, processes, and technology, the fourth and fifth themes—Excellence in Central Banking Operations and An Impact-Focused High-Performance Organisation—will ensure operational efficiency and strengthen the Bank’s institutional capacity.
The Governor further highlighted core values such as integrity, meritocracy, professionalism, accountability, courage, and tenacity as guiding principles for delivering professionalism, transparency, and accountability to Nigerians. Commending the Strategy Management Department for developing the plan in-house without external consultants, he urged all CBN staff to uphold ethics, good governance, and transparency in executing the strategy. He also stressed that the plan was not for the CBN alone but for all Nigerians, calling on stakeholders to collaborate in building a more prosperous nation and repositioning the Bank as a credible institution at the forefront of economic transformation.
Staff members described the plan—CBN’s fourth strategic cycle after those of 2012–2015, 2015–2019, and 2021–2024—as a bold repositioning of the Bank to its core mandate. They expressed appreciation to management and the Strategy Department for delivering the first entirely in-house strategy within record time. The launch climaxed with the unveiling of the theme “Repositioning for Impact,” which stakeholders said resonates with the CBN’s mission, vision, and values. They lauded the Bank’s leadership and workforce for their unity of purpose and reaffirmed their commitment to supporting the effective execution of the strategy.
What the law says
The 2007 CBN Act mandates the apex bank to promote financial system stability as one of its core objectives. To achieve this, the apex bank has, over the years, implemented reforms aimed at strengthening the banking sector, improving access to finance, building institutional capacity, and entrenching sound corporate governance practices. These measures are designed to safeguard the system, protect depositors, and sustain confidence in the economy.
Highlighting the importance of stability, the President of the Bank Customers Association of Nigeria (BCAN), Dr. Uju Ogubunka, explained that the collapse of financial institutions, especially banks, carries grave risks. Such failures, he noted, can erode public confidence, trigger a sudden contraction in money supply, reduce savings and investments, and even collapse payment systems—all with devastating effects on the real economy.
Under the leadership of Governor Cardoso, the CBN has also embarked on deliberate efforts to improve the functioning and transparency of the foreign exchange (FX) market. These reforms have yielded remarkable results. For instance, the average daily turnover in the Nigerian Autonomous Foreign Exchange Market grew by 226 per cent in the first half of last year compared to the same period in 2023. Similarly, foreign portfolio inflows rose by more than 72 per cent, reflecting improved investor confidence in the Nigerian economy. At the same time, the country’s foreign exchange reserves increased significantly—from $32 billion in May 2023 to over $41.5 billion. This figure represents the equivalent of 10 months of import cover, the highest level in almost three years, and a buffer that strengthens the economy against external shocks.
The market has also proven more efficient in facilitating capital mobility. Over the past year, it supported more than $9 billion in capital outflows, enabling investors to repatriate capital and dividends freely. This marks a sharp departure from past experiences when such repatriations were delayed for months, undermining confidence in Nigeria’s financial markets. Cardoso has emphasised that these gains are being consolidated through enhanced surveillance of market activities. The CBN has intensified its monitoring to ensure strict compliance with rules and to weed out bad actors seeking to manipulate or destabilize the system. Taken together, these reforms demonstrate the apex bank’s determination to stabilise Nigeria’s financial sector, protect investors, and foster a resilient economy capable of supporting long-term growth.
“Together, we must build a market based on strong governance and transparency. As regulators, we will maintain a zero-tolerance approach to compliance violations. Within the banking sector, I am pleased to note that the sector remains robust with key indicators reflecting a resilient system. The non-performing loan ratio remains within the prudential benchmark of five per cent, showcasing strong credit risk management,” he said.
Cardoso added: “The banking sector liquidity ratio comfortably exceeds the regulatory floor of 30 percent, a level which ensures banks are maintaining adequate cash flow to meet the needs of customers and their operations. The recent stress test conducted also reaffirmed the continued strength of our banking system.”
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