The Federal Government and the Central Bank of Nigeria have signed an agreement to coordinate policies on inflation, public debt, government borrowing, liquidity and foreign exchange management as the country moves towards a new inflation-targeting framework.
The Memorandum of Understanding on Fiscal-Monetary Policy Coordination, signed in Abuja on Friday, establishes a formal framework for the Federal Ministry of Finance and the CBN to align key economic decisions without compromising the apex bank’s independence.
CBN Governor, Olayemi Cardoso, said the agreement would deepen cooperation in government cash management, debt issuance, liquidity forecasting, macroeconomic analysis and policy consultations.
“This Memorandum provides a structured framework for regular consultation, information exchange and policy coordination,” Cardoso said.
“It will strengthen collaboration in critical areas such as government cash management, debt issuance planning, liquidity forecasting, macroeconomic analysis and periodic policy consultations, thereby enhancing policy coherence and the effectiveness of economic management.”
The CBN governor said fiscal and monetary policies were complementary, as government expenditure, taxation and borrowing decisions affect economic activity, while monetary policy influences liquidity, interest rates and price stability.
According to him, the agreement is particularly significant as the CBN advances its transition towards an inflation-targeting framework. “The timing of this agreement is particularly noteworthy as the Central Bank of Nigeria advances its transition towards an inflation-targeting framework,” he said.
He explained that the ministry and the apex bank had collaborated for decades on inflation management, debt sustainability, budget financing, exchange rate stability and responses to economic shocks, but the new agreement would formally institutionalise the relationship.
The Minister of Finance and Coordinating Minister of the Economy, Taiwo Oyedele, said the government intended to use the framework to prevent fiscal and monetary policies from pulling in different directions.
He stressed, however, that closer coordination would not undermine the CBN’s autonomy. “The operational independence of the Central Bank remains sacrosanct. Coordination must never become fiscal dominance. The CBN will retain full independence in pursuing price and financial-system stability,” Oyedele said.
The minister also disclosed that the government was targeting a sustainable reduction in inflation to single digits, arguing that monetary policy alone could not address Nigeria’s inflation problem.
“Our objective is to bring inflation sustainably into single digits and keep it there, and that cannot be monetary policy’s job alone,” he said. “Fiscal policy must play its part: disciplined, disinflationary spending; sound cash and liquidity management; efficient financing that does not crowd out the private sector.”