By Ayomide Otitoju
The Federal Government and the Central Bank of Nigeria (CBN) have agreed to strengthen coordination between fiscal and monetary policies to curb inflation, improve government borrowing and liquidity management, and protect private-sector access to credit.
The agreement is contained in a Memorandum of Understanding (MoU) signed by the Federal Ministry of Finance and the CBN.
The framework provides for regular consultations, information sharing and joint policy assessments between the two institutions.
Minister of Finance and Coordinating Minister of the Economy, Taiwo Oyedele, said the agreement would institutionalise fiscal and monetary policy coordination and reduce its dependence on the individuals occupying public offices.
Oyedele said the two institutions had different mandates but operated within the same economy, making closer coordination necessary for effective economic management.
He noted that government borrowing could affect liquidity and interest rates, while monetary policy could influence the government’s financing costs. He added that tariffs, exchange rates and government spending could also affect prices, revenues and demand.
According to the minister, the framework would promote information sharing, common macroeconomic assumptions, more consistent economic forecasts and mechanisms for resolving policy differences.
He stressed that the arrangement would not undermine the independence of the CBN.
“The operational independence of the central bank remains sacrosanct. Coordination must never become fiscal dominance,” Oyedele said.
He said the CBN would retain full independence in pursuing price and financial system stability, while the government would strengthen fiscal governance, accountability and cash management.
Oyedele said the government’s objective was to bring inflation sustainably into single digits, noting that achieving the target would require coordinated action beyond monetary policy.
He said fiscal measures would include disciplined government spending, improved cash and liquidity management, and more efficient financing to prevent government borrowing from crowding out private-sector credit.
The minister also identified food supply, imported costs, energy and logistics as structural drivers of inflation that could not be addressed through interest-rate policy alone.
He said the government would focus on measures including food reserves, improved seeds and farm yields, irrigation, climate resilience and better roads for transporting agricultural produce.
Oyedele also called for closer cooperation with state governments to remove unnecessary road levies and improve access roads to farms.
On fuel prices, he said the government was seeking price stability without returning to discretionary fuel subsidies.
He said tax exemptions in the oil sector and improved foreign exchange stability had helped moderate prices, warning that reversing existing policies could increase pressure on prices and affordability.
The minister also stressed the importance of reliable economic data, saying outdated or inadequate information could weaken policymaking.
He said the Ministry of Finance was working with the National Bureau of Statistics to provide additional data, including the producer price index, alongside consumer prices, employment and productivity indicators.
Oyedele said the fiscal and monetary authorities would share information on government cash positions, financing plans, credit growth and foreign exchange flows.
“Better coordination starts with a common evidence base,” he said.
CBN Governor Olayemi Cardoso said the MoU would formalise the long-standing collaboration between the central bank and the Ministry of Finance.
He said the institutions had worked together on inflation, debt sustainability, budget financing, exchange-rate stability, economic reforms and responses to domestic and global shocks.
Cardoso said the agreement would cover government cash management, debt issuance planning, liquidity forecasting, macroeconomic analysis and regular policy consultations.
According to him, predictable engagement between both institutions would improve decision-making, reduce uncertainty and strengthen Nigeria’s ability to respond to economic shocks.
He said the framework was particularly important as the CBN moves towards an inflation-targeting framework, adding that its success would require a supportive fiscal environment.
CBN Deputy Governor Sani Abdullahi said closer coordination was necessary because the same economic shocks could affect fiscal and monetary policy simultaneously.
He cited disruptions to energy and shipping routes in the Middle East, which could affect oil prices, government revenue and foreign exchange inflows while increasing energy, freight and insurance costs.
Abdullahi said the framework would promote timely information sharing, joint technical analysis, scenario planning and stress testing.
He added that the institutions would assess different oil-price and production scenarios to determine their potential impact on government revenue and foreign exchange inflows.
He said the success of the MoU would depend on implementation rather than the signing ceremony.
“The value of this agreement will be determined by its implementation,” Abdullahi said.
Permanent Secretary, Federal Ministry of Finance, Raymond Omachi, said the agreement would provide a transparent framework for aligning fiscal decisions with monetary policy.
He said it was designed to balance inflation control with economic growth, ensuring that government spending did not unnecessarily increase inflationary pressures while monetary tightening did not unduly weaken growth and employment.
Omachi said the framework would also improve coordination of government borrowing and money-market liquidity management, reducing the risk of public-sector borrowing limiting credit available to businesses.
He said the agreement would further cover exchange-rate and revenue stability, foreign exchange management, trade balances and Nigeria’s capacity to withstand economic shocks.
Oyedele said the broader objective was to ensure that fiscal and monetary policies did not work at cross-purposes.
“Nigeria has one economy. Fiscal policy cannot succeed without price stability. Monetary policy cannot deliver price stability if fiscal policy pulls in the opposite direction,” he said.
He said the long-term test of the framework would be whether policy coordination could be sustained regardless of who occupied the offices.
“The greatest success will be measured when coordination no longer depends on who holds these offices,” Oyedele said.
