Central Bank of Nigeria (CBN)

The Central Bank of Nigeria (CBN) is the central bank and principal financial regulator of the Federal Republic of Nigeria. It conducts monetary policy, issues the national currency, the naira, manages the country's external reserves, acts as banker to the federal government, and licenses and supervises banks and most other financial institutions. Its head office is in Abuja.

For payment companies the CBN is the authority that matters most in Nigeria. It licenses mobile money operators, switches, processors and remittance firms, sets the rules for agents, cards and electronic transfers, and controls access to foreign exchange. Like other central banks, it combines these roles with responsibility for the stability of the financial system.

The bank was created by the Central Bank of Nigeria Act of 1958 and began operations on 1 July 1959, shortly before the country's independence. Its current powers come from the Central Bank of Nigeria Act 2007, which sets out its objectives and a degree of operational independence, and from the Banks and Other Financial Institutions Act 2020, which governs the licensing and regulation of banks and other financial firms.

The bank is led by a governor, assisted by deputy governors, and overseen by a board. Interest rate decisions are taken by the Monetary Policy Committee, which meets several times a year and sets the benchmark policy interest rate, known as the Monetary Policy Rate.

• Monetary and price stability. The bank sets interest rates and reserve requirements and conducts open market operations with the aim of controlling inflation.
• Currency. It has the sole right to issue naira notes and coins.
• External reserves and exchange rate. It holds Nigeria's foreign exchange reserves and makes the rules of the foreign exchange market.
• Banking supervision. It licenses and examines commercial, merchant, non-interest and microfinance banks, among others. Deposit insurance is provided by a separate agency, the Nigeria Deposit Insurance Corporation.
• Payment system. It operates the real-time gross settlement system and oversees the rest of the payments infrastructure.
• Banker and adviser to government. It holds federal government accounts and advises on economic policy.

Nigeria's retail payment infrastructure centres on the Nigeria Inter-Bank Settlement System, a company owned jointly by the central bank and the licensed banks, which runs the instant transfer service used for most account-to-account payments. The CBN also introduced the Bank Verification Number in 2014, a biometric identifier that links a person's accounts across all banks and is a foundation of customer identification.

The bank issues separate license categories for payment activities, each with its own capital requirement and permitted scope. They include switching and processing, mobile money operation, payment solution services, and the payment terminal service provider category for firms that deploy and maintain point-of-sale terminals. In 2018 it created the payment service bank, a limited bank that can take deposits and make payments but cannot lend, intended to extend services to rural areas. Agent banking rules govern the large networks of point-of-sale agents through which many Nigerians withdraw and deposit cash.

Firms that pay out inbound remittances need approval as an international money transfer operator. The bank has changed the rules for such firms several times, including on the currency in which recipients are paid.

For many years Nigeria maintained several exchange rates, with an official exchange rate well below the parallel market rate and restrictions on who could buy foreign currency for what purpose. In June 2023 the bank moved to unify the rates and allow the naira to trade more freely, which led to a sharp depreciation. It has since introduced an electronic matching system for interbank trading and tightened the licensing of bureau de change operators. Exchange control rules directly affect how foreign payment companies settle with Nigerian partners and repatriate funds.

In October 2021 the CBN launched the eNaira, the first central bank digital currency in Africa. Adoption has been low compared with bank transfers and mobile money.

In February 2021 the bank instructed regulated institutions to close accounts used for trading cryptocurrency. It reversed this position in December 2023, issuing guidelines that allow banks to open accounts for licensed virtual asset service providers, while banks themselves remain barred from holding or trading crypto assets. Licensing of such providers falls to the Securities and Exchange Commission of Nigeria.

The bank has pursued a cashless policy since 2012, with limits and charges on large cash withdrawals to encourage electronic payments. A redesign of higher-value naira notes announced in late 2022, with a short deadline for exchanging old notes, caused a severe cash shortage in early 2023 and a surge in electronic payments that strained bank systems; the Supreme Court extended the validity of the old notes.

In March 2024 the bank announced a large increase in minimum capital for banks, with a deadline of 31 March 2026, requiring banks to raise new equity, merge or move to a lower license category; the bank reported that 33 banks met the new requirements. It has also been criticized at times for lending heavily to the government and for intervention schemes outside the usual remit of a central bank, practices that later leadership has sought to reduce.

• Central Bank of Nigeria