BY COBHAM NSA – The Federal Government and the Central Bank of Nigeria (CBN) have locked arms in a key policy alliance, endorsing a landmark agreement to crush inflation and steady the nation’s rocky economy.
By this strategic fiscal deal, the objective is to streamline government borrowing, sharpen liquidity management, and aggressively shield private-sector businesses from being crowded out of the credit market.
He explained that the arrangement would make coordination between fiscal and monetary authorities more permanent and less dependent on the personalities occupying public offices, noting that the two institutions have different responsibilities but operate within the same economy, making cooperation necessary 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, adding that the new framework would provide for stronger information sharing, common macroeconomic assumptions, more consistent economic forecasts and clearer ways of resolving differences between fiscal and monetary authorities.
However, assuring that the arrangement would not compromise the apex bank’s independence, the Minister said: “So this is independence with coordination. The operational independence of the central bank remains sacrosanct. Coordination must never become fiscal dominance.”
He said the CBN will retain full independence in pursuing price and financial system stability, while the government will strengthen fiscal governance, accountability and cash management, stressing that the government’s target is to bring inflation sustainably into single digits, adding that achieving this 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,” the Minister said.
Further explaining that fiscal policy would contribute through disciplined government spending, better cash and liquidity management and more efficient financing that would not crowd out private businesses from accessing credit, Oyedele linked Nigeria’s inflation to structural problems, including food supply, imported costs, energy and logistics, which he said could not be solved by interest-rate policy alone.
On the Ministry’s partnership with the National Bureau of Statistics (NBS) to provide additional data, including the producer price index, alongside consumer prices, employment and productivity information, he said such information would help policymakers identify inflationary pressures before they reach consumers.
With his firm belief that economic growth must be measured by real job creation, not just GDP numbers, Oyedele said to drive the process, fiscal and monetary authorities will now sync data on government cash positions, financing plans, credit expansion, and foreign exchange flows, adding: “Better coordination starts with a common evidence base”.
Oyedele, who stressed the urgent need to align Nigeria’s fiscal and monetary policies, warned that the country’s single economy cannot thrive while they work at cross-purposes, and stressed that, “Fiscal policy cannot succeed without price stability. Monetary policy cannot deliver price stability if fiscal policy pulls in the opposite direction.”
In his remarks, the CBN Governor, Olayemi Cardoso said the newly signed MoU transitions the decades-long relationship between the apex bank and the Ministry of Finance into a formal, structured framework, noting that while both institutions have collaborated for generations on critical macroeconomic hurdles, including inflation, debt sustainability, budget financing, and exchange-rate stability, the pact institutionalizes these joint efforts to better withstand domestic and global economic shocks.
Explaining that “What distinguishes today’s event is the formal institutionalisation of that collaboration,” Cardoso said, the agreement would cover government cash management, debt issuance planning, liquidity forecasting, macroeconomic analysis and regular policy consultations.
He said predictable engagement between both institutions should improve decision-making, reduce uncertainty and strengthen Nigeria’s ability to respond to emerging economic problems, noting that the agreement was particularly important as the apex bank moves towards an inflation-targeting framework.
Also acknowledging that “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,” the CBN Governor said the framework would enable both institutions to align their actions, reduce policy conflicts and pursue common national economic objectives.
Ultimately, he said the main objective is to build a more stable, resilient and productive economy capable of delivering broad-based prosperity.
