The Federal Government and the Central Bank of Nigeria (CBN) have signed a Memorandum of Understanding (MoU) aimed at strengthening coordination between fiscal and monetary policies to control inflation, improve government borrowing and liquidity management, and protect private-sector access to credit.
The agreement, signed by the Federal Ministry of Finance and the CBN, 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 framework would make coordination between fiscal and monetary authorities more permanent and less dependent on the individuals occupying public offices.
“Today matters not because we are signing a document, but because of what it represents: our determination to institutionalise coordination between fiscal and monetary policy,” Oyedele said.
He noted that while the two institutions have distinct responsibilities, their policies operate within the same economy, making closer cooperation essential for effective economic management.
“Government borrowing affects liquidity and interest rates. Monetary policy affects the government’s financing cost. Tariffs and exchange rates affect prices and revenue. Spending affects demand,” he said.
According to Oyedele, the new framework will promote stronger information sharing, common macroeconomic assumptions, more consistent economic forecasts and clearer mechanisms for resolving policy differences between fiscal and monetary authorities.
He stressed, however, that the arrangement would not undermine the independence of the CBN.
“So this is independence with coordination. The operational independence of the central bank remains sacrosanct. Coordination must never become fiscal dominance,” he said.
Oyedele said the CBN would retain full independence in pursuing price and financial-system stability, while the government would focus on strengthening fiscal governance, accountability and cash management.
Inflation Target
The minister said the government’s objective was to bring inflation sustainably into single digits, noting that achieving the target would require action beyond monetary policy.
“Inflation is, as a process, a whole-of-government agenda. 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.
He said fiscal policy would support the objective through disciplined government spending, improved cash and liquidity management, and more efficient financing that would prevent government borrowing from crowding out private businesses.
Oyedele also identified structural factors such as food supply, imported costs, energy and logistics as major drivers of inflation that cannot be addressed through interest-rate policy alone.
He said the government would focus on measures including strengthening food reserves, improving access to better seeds, raising farm yields, expanding irrigation, building climate resilience and improving roads used to transport agricultural produce to markets.
He also called for greater cooperation with state governments, particularly in removing unnecessary road levies and improving access roads to farms.
Fuel Prices, Economic Data
On fuel prices, Oyedele 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 contributed to moderating prices, warning that reversing existing measures could increase pressure on prices and affordability.
The minister also stressed the need for more timely and comprehensive economic data to support policymaking.
He said the Ministry of Finance was working with the National Bureau of Statistics to expand available data, including the producer price index, alongside information on consumer prices, employment and productivity.
According to him, better data would allow policymakers to identify inflationary pressures before they are reflected in consumer prices.
Oyedele added that economic performance should also be assessed by the number of quality jobs created, rather than GDP growth alone.
Under the new framework, fiscal and monetary authorities will 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: Framework Will Strengthen Policy Coordination
CBN Governor Olayemi Cardoso said the MoU would transform the long-standing relationship between the central bank and the Ministry of Finance into a more formal and structured arrangement.
He noted that both institutions had worked together for decades on issues including inflation, debt sustainability, budget financing, exchange-rate stability, economic reforms and responses to domestic and global shocks.
“What distinguishes today’s event is the formal institutionalisation of that collaboration,” Cardoso said.
He said the agreement would cover government cash management, debt issuance planning, liquidity forecasting, macroeconomic analysis and regular policy consultations.
According to Cardoso, predictable engagement between the two institutions should improve decision-making, reduce uncertainty and strengthen Nigeria’s capacity to respond to emerging economic challenges.
The CBN governor said the framework was particularly important as the central bank moves towards an inflation-targeting framework.
“The success of inflation targeting is known to rest not only on the effectiveness of monetary policy but also on the existence of a supportive fiscal environment,” he said.
Cardoso said the agreement would help both institutions align their actions, reduce policy conflicts and pursue shared national economic objectives.
He said the ultimate goal was to build a more stable, resilient and productive economy capable of delivering broad-based prosperity.
