Precious Nwonu, Enugu
The Federal Government and the Central Bank of Nigeria have entered into a new agreement aimed at improving coordination on inflation, public borrowing, debt management, liquidity and foreign exchange.
The Memorandum of Understanding on Fiscal-Monetary Policy Coordination was signed in Abuja on Friday by the Federal Ministry of Finance and the CBN.
The agreement establishes a formal mechanism for both institutions to exchange information and coordinate economic policies while preserving the operational independence of the apex bank.
Speaking at the signing, CBN Governor, Olayemi Cardoso, said the framework would strengthen cooperation in government cash management, debt issuance, liquidity forecasting, macroeconomic analysis and policy consultations.
He said fiscal and monetary policies were closely connected, noting that government spending, taxation and borrowing decisions could affect economic activity, while monetary policy influenced liquidity, interest rates and price stability.
Cardoso said the agreement was particularly important as the CBN continued its transition towards an inflation-targeting framework.
He explained that achieving the objectives of inflation targeting required effective monetary policy alongside fiscal policies that supported price stability.
According to him, the Federal Ministry of Finance and the CBN had collaborated over the years on issues including inflation management, debt sustainability, budget financing, exchange rate stability and responses to economic shocks.
He said the new agreement would formalise and strengthen that cooperation.
The Minister of Finance and Coordinating Minister of the Economy, Taiwo Oyedele, said the framework was intended to ensure that fiscal and monetary policies worked in the same direction.
Oyedele, however, stressed that increased coordination would not compromise 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,” he said.
The minister said the government was targeting a sustainable reduction in inflation to single digits, adding that monetary policy alone could not resolve the country’s inflationary pressures.
“Our objective is to bring inflation sustainably into single digits and keep it there, and that cannot be monetary policy’s job alone,” Oyedele said.
He identified food prices, import costs, energy and logistics as some of the structural factors driving inflation.
Oyedele said the government would therefore focus on measures including strengthening grain reserves, improving agricultural yields, expanding irrigation and developing access roads to farms.
He also ruled out a return to fuel subsidy, arguing that such a policy could put additional pressure on government finances and the naira.
“A return to subsidy would create a fiscal collapse, pressure the naira, and ultimately undermine the price affordability it seeks to provide,” he said.
Under the new framework, the Finance Ministry and the CBN are expected to improve the sharing of information on government cash positions, borrowing plans, credit growth and foreign exchange flows.
The CBN Deputy Governor, Corporate Services Directorate, Dr Muhammad Abdullahi, said the agreement was particularly relevant amid global economic uncertainty and geopolitical tensions.
He cited potential disruptions to energy and shipping routes in the Middle East, saying such developments could affect oil prices, government revenues, inflation, capital flows and financing conditions simultaneously.
“This is why coordination matters. Coordination does not mean blurring respective mandates or compromising the independence required for effective monetary policy,” Abdullahi said.
He said the framework would facilitate regular consultations, information sharing, joint technical analysis, scenario planning and stress testing.
Abdullahi added that the two institutions would be better positioned to assess the impact of changes in oil prices and production on government revenue, foreign exchange inflows, external reserves, inflation, liquidity and financing conditions.
“Uncertainty is not an argument for waiting; it is an argument for preparedness,” he said.
Also speaking, the Permanent Secretary of the Federal Ministry of Finance, Raymond Omachi, said the agreement was designed to balance inflation control with economic growth.
Omachi said government spending would need to be managed carefully to avoid adding to inflationary pressures, while monetary tightening should not unnecessarily restrict economic growth and employment.
“The core objective of the framework is inflation and growth balance,” he said.
He added that the arrangement would help align government borrowing plans with money-market liquidity management, with the aim of reducing the risk of public borrowing crowding out private-sector credit.
The permanent secretary said the framework would also cover exchange-rate and revenue stability, foreign exchange management, resilience to external shocks and regular data exchange between the government and the CBN.
