The Federal Government and the Central Bank of Nigeria (CBN) have agreed to strengthen coordination between fiscal and monetary policies to tackle inflation, improve government borrowing and liquidity management, and safeguard 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, providing 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 institutionalise coordination between fiscal and monetary authorities, making it less dependent on the personalities 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 said although the two institutions have distinct responsibilities, they operate within the same economy, making close coordination essential to 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.
Oyedele said the framework would strengthen information sharing, establish common macroeconomic assumptions, improve the consistency of economic forecasts and provide clearer mechanisms for resolving differences between fiscal and monetary authorities.
He stressed, however, that the arrangement would not compromise 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.
According to him, the CBN will retain full independence in pursuing price and financial-system stability, while the government will strengthen fiscal governance, accountability and cash management.
Oyedele said the government’s objective was to bring inflation sustainably into single digits, stressing 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 contribute through disciplined government spending, improved cash and liquidity management, and more efficient financing arrangements that would prevent government borrowing from crowding out private businesses.
The minister also attributed Nigeria’s inflationary pressures to structural factors, including food supply constraints, import costs, energy and logistics, which he said could not be addressed through interest-rate policy alone.
He said the government would focus on measures such as maintaining food reserves, improving access to quality seeds, increasing farm yields, expanding irrigation, strengthening climate resilience and improving roads for transporting agricultural produce to markets.
Oyedele also called for greater cooperation with state governments, particularly in eliminating unnecessary road levies and improving access roads to farms.
On fuel prices, Oyedele said the government was seeking to achieve greater 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 put additional pressure on prices and affordability.
The minister also called for improved economic data to support government decision-making, saying poor or outdated information could undermine economic management.
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 data would help policymakers identify inflationary pressures before they reach consumers.
He 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,” Oyedele said.
CBN Governor Olayemi Cardoso said the MoU would transform the longstanding relationship between the two institutions into a more formal and structured arrangement.
He said the CBN and Ministry of Finance had collaborated 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 institutions should improve decision-making, reduce uncertainty and strengthen Nigeria’s capacity to respond to emerging economic challenges.
He said the agreement was particularly important as the CBN 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 framework would allow both institutions to better 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.
CBN Deputy Governor Sani Abdullahi said closer coordination had become increasingly important because the same economic shocks could affect both fiscal and monetary policy simultaneously.
He cited disruptions to energy and shipping routes in the Middle East as an example.
According to him, such disruptions could push up oil prices, increasing Nigeria’s export earnings, government revenue and foreign-exchange inflows, while higher energy, freight and insurance costs could also raise domestic prices.
Global inflationary pressures could, in turn, affect interest rates, capital flows and financing conditions, he said.
“This is why coordination matters,” Abdullahi said.
He said the agreement would require timely and reliable information sharing, joint technical analysis, scenario planning and stress testing on issues of common interest.
Abdullahi said the framework would be particularly useful for government cash management, liquidity forecasting, domestic financing operations and broader assessments of economic conditions.
He said Nigeria must prepare for different oil-price and production scenarios because the country could not predict with certainty how long external disruptions would last or where oil prices would be in the coming months.
The CBN deputy governor said the institutions should assess in advance how different oil-price and production outcomes could affect government revenue and foreign-exchange inflows.
He stressed that the success of the MoU would ultimately depend on implementation rather than the signing ceremony.
“The value of this agreement will be determined by its implementation. Its success will not be measured by judicial ceremony alone, but by what happens after today,” he said.
Permanent Secretary, Federal Ministry of Finance, Raymond Omachi, said the agreement would establish a transparent framework for closer alignment between fiscal choices and monetary strategies.
He said one of its key objectives was to balance inflation control with economic growth, ensuring that government spending did not unnecessarily increase inflationary pressure while monetary tightening did not needlessly 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 the private sector.
He said the agreement would cover exchange-rate and revenue stability, including foreign-exchange management, trade balances and Nigeria’s capacity to withstand economic shocks.
The Permanent Secretary said the framework would also formalise regular policy dialogue and data sharing between technical officials of the Ministry and the CBN.
He said the agreement was intended to create a more predictable investment environment, strengthen public confidence and build a more resilient economic foundation.
For Oyedele, the broader objective is to ensure that fiscal and monetary policies no longer 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 two institutions would coordinate without compromising their independence, share information while maintaining accountability, and resolve differences through evidence and in the national interest.
Oyedele said the long-term test of the arrangement would be whether Nigeria’s economic management could withstand future shocks without relying on individual personalities to maintain coordination.
“The greatest success will be measured when coordination no longer depends on who holds these offices,” Oyedele said.
