FG, CBN Formalise Fiscal And Monetary Policy Coordination

The Federal Government and the Central Bank of Nigeria (CBN) have signed a Memorandum of Understanding (MoU) to institutionalise coordination between fiscal and monetary policies.

The agreement, signed by the Federal Ministry of Finance and the CBN on Friday, provides a structured framework for regular consultation, information sharing and policy coordination between the two institutions.

Speaking at the signing ceremony in Abuja, CBN Governor Olayemi Cardoso said the agreement represented a commitment to deepen collaboration in the interest of the Nigerian economy and its people.

Cardoso said fiscal and monetary policies were complementary instruments for managing a modern economy. He explained that fiscal policy influences economic activity through government spending, taxation and borrowing, while monetary policy promotes price stability and financial system soundness through liquidity, interest rates and other monetary conditions.

According to him, the MoU does not create a new relationship between the CBN and the Ministry of Finance, which have worked together for decades, but formally institutionalises their longstanding collaboration in economic management and reforms. Cardoso said the framework would strengthen cooperation in government cash management, debt issuance planning, liquidity forecasting, macroeconomic analysis and periodic policy consultations. He said the agreement would transform an existing relationship into one anchored on clear processes and institutional commitment.

The CBN governor said the timing of the agreement was important as the apex bank advances its transition to an inflation-targeting framework. He said the success of inflation targeting depended not only on effective monetary policy but also on a supportive fiscal environment.

According to him, the MoU would provide a foundation for developing the operational framework for the inflation targeting regime, while regular dialogue, information sharing and coordinated policy assessments would help both institutions align their actions and minimise policy trade-offs. Cardoso said the objective was to build a more stable, resilient and productive economy capable of delivering broad-based prosperity to Nigerians. He added that the agreement reflected the recognition that complex economic challenges could not be addressed by institutions acting in isolation.

Also speaking, the Minister of Finance and Coordinating Minister of the Economy, Taiwo Oyedele, said the agreement was designed to institutionalise coordination between fiscal and monetary policies rather than make it dependent on individual personalities. Oyedele said fiscal and monetary authorities had distinct mandates but operated within the same economy, making coordination necessary. He said government borrowing affects liquidity and interest rates, while monetary policy affects government financing costs. He added that tariffs and exchange rates affect prices and revenue, while government spending affects demand and agricultural productivity affects food inflation.

According to him, the MoU would strengthen information sharing, align macroeconomic assumptions, improve governance and provide clearer mechanisms for addressing situations where fiscal and monetary actions could work at cross purposes.

Oyedele stressed that the coordination framework would not compromise the CBN's operational independence.

He said the central bank's operational independence remained intact.