Governor of the Central Bank of Nigeria, Olayemi Cardoso, has raised concerns over rising liquidity in the banking system, warning that increasing revenue disbursements through the Federation Account Allocation Committee (FAAC) could undermine the Bank’s disinflation drive. In his personal statement following the 300th Monetary Policy Committee (MPC) meeting on May 20, Cardoso stressed the need for continued tight monetary conditions to contain inflationary pressures.
The CBN governor noted that while inflation is beginning to ease, recent injections of liquidity — particularly from growing FAAC allocations — pose a threat. FAAC disbursed N1.818 trillion to the three tiers of government in June 2025, up from N1.659 trillion in May, with statutory revenue contributing over N1 trillion. Analysts warn this surge in liquidity could lead to more naira chasing limited goods, risking a resurgence in inflation.
Data from the National Bureau of Statistics shows headline inflation dropped to 22.22% in June 2025, from 22.97% in May — a significant decline from 34.19% in June 2024. However, month-on-month inflation rose slightly, suggesting that price pressures persist. As the CBN prepares for its next MPC meeting, market watchers are divided, with some expecting a hold on the 27.5% policy rate, while others anticipate a marginal cut as the Bank weighs inflation control against economic growth.
Cardoso’s comments underscore the delicate balancing act facing the apex bank as it navigates competing fiscal and monetary dynamics in a fragile economic recovery.
