FG, CBN SIGN MOU TO STRENGTHEN FISCAL, MONETARY POLICY COORDINATION

The Federal Government and the Central Bank of Nigeria (CBN) have formalised a new framework for closer coordination of fiscal and monetary policies, with the aim of tackling inflation, improving debt and liquidity management and ensuring continued access to credit for the private sector.

The agreement was sealed through a Memorandum of Understanding (MoU) between the Federal Ministry of Finance and the CBN, establishing mechanisms for regular consultations, information exchange and joint assessment of economic policies.

Minister of Finance and Coordinating Minister of the Economy, Taiwo Oyedele, said the agreement was designed to make cooperation between fiscal and monetary authorities more structured and sustainable, rather than dependent on the individuals occupying key offices.

Oyedele explained that decisions on government borrowing, interest rates, exchange rates, tariffs and public spending were interconnected and therefore required greater coordination between the two institutions.

He said the framework would promote the use of common economic assumptions, improved forecasting, timely information sharing and structured mechanisms for resolving policy differences.

The minister, however, stressed that the arrangement would not undermine the independence of the CBN, noting that the apex bank would retain operational independence in its mandate to maintain price and financial system stability.

According to him, the government’s goal is to reduce inflation sustainably to single-digit levels, a target he said could not be achieved through monetary policy alone.

He said fiscal measures would complement monetary efforts through responsible government spending, improved cash management and more efficient borrowing, particularly to prevent public-sector financing from restricting credit available to businesses.

Oyedele also identified food supply constraints, energy costs, logistics challenges and imported inflation among the structural factors contributing to price increases.

He said the government was pursuing measures to improve agricultural production and distribution, including better seeds, irrigation, food reserves, climate resilience and improved roads linking farms to markets.

On fuel prices, the minister said the government was seeking greater price stability without returning to discretionary fuel subsidies, while highlighting the role of tax policies and foreign exchange stability in moderating costs.

He also emphasised the importance of reliable economic data, saying the Ministry of Finance was collaborating with the National Bureau of Statistics to strengthen the information available to policymakers, including data on producer prices, employment and productivity.

CBN Governor, Olayemi Cardoso, said the MoU would give formal structure to the longstanding collaboration between the apex bank and the Ministry of Finance.

Cardoso said the two institutions had historically worked together on issues including inflation, debt sustainability, budget financing, exchange-rate stability and responses to economic shocks.

He said the new framework would cover government cash management, debt issuance planning, liquidity forecasting, macroeconomic analysis and regular policy consultations.

According to the CBN governor, closer coordination would help reduce policy uncertainty and improve the country’s ability to respond to emerging economic challenges, particularly as the apex bank advances its inflation-targeting framework.

He noted that the effectiveness of monetary policy would also depend on a supportive fiscal environment, adding that the agreement would help both institutions minimise policy conflicts while pursuing shared economic objectives.

CBN Deputy Governor, Sani Abdullahi, said stronger coordination had become increasingly important because external shocks could simultaneously affect government revenues, foreign exchange inflows, inflation and financing conditions.

He cited disruptions to energy and shipping routes in the Middle East as an example, noting that such developments could influence oil prices, government earnings, foreign exchange inflows and domestic costs.

Abdullahi said the MoU would facilitate timely information sharing, joint technical assessments, scenario planning and stress testing to prepare for different economic outcomes.

He stressed the need for Nigeria to assess various oil-price and production scenarios in advance, given the uncertainty surrounding the duration and impact of external disruptions.

Permanent Secretary, Federal Ministry of Finance, Raymond Omachi, said the agreement would provide a transparent framework for aligning fiscal decisions with monetary strategies.

Omachi said the arrangement was intended to strike a balance between controlling inflation and supporting economic growth, while improving coordination of government borrowing and money-market liquidity.

He added that the framework would also strengthen cooperation on foreign exchange, revenue stability, trade balances and the country’s capacity to withstand economic shocks.

The Permanent Secretary said regular policy dialogue and data sharing between officials of the Ministry and the CBN would help create a more predictable environment for investment and strengthen confidence in the economy.

Oyedele said the broader objective was to ensure that fiscal and monetary policies worked towards common economic goals rather than undermining one another.

He added that the long-term measure of the agreement would be its implementation and its ability to ensure sustained coordination between the two institutions beyond the tenure of individual officials.