From Adanna Nnamani, Abuja
The Central Bank of Nigeria (CBN) has intensified efforts to strengthen coordination with sub-national governments as part of moves to transition the country to a new inflation-targeting monetary policy framework aimed at ensuring price stability and reducing macroeconomic uncertainty.
Speaking during an engagement with state governments facilitated through the Nigeria Governors’ Forum Secretariat in Abuja, the Deputy Governor in charge of Economic Policy Directorate at the apex bank, Muhammad Sani Abdullahi, said the success of the inflation-targeting regime would depend largely on fiscal discipline and coordinated policy actions across all levels of government.
He explained that inflation targeting represents a shift to a more transparent, forward-looking and rule-based monetary framework designed to anchor inflation expectations and strengthen economic stability.
According to him, while the CBN retains responsibility for monetary policy implementation, fiscal operations by state governments through borrowing, spending, debt accumulation and cash management have direct implications for inflation outcomes in the country.
“In an inflation-targeting regime, persistent, unpredictable or expansionary fiscal behaviour at the subnational level can significantly undermine price stability,” Abdullahi said.
He warned that uncoordinated fiscal actions by states could weaken monetary policy signals and frustrate efforts aimed at controlling inflation.
The Deputy Governor identified key channels through which state governments influence inflation to include borrowing decisions, expenditure patterns, wage bills, capital project execution, salary arrears, contractor financing and weak coordination on Federation Account Allocation Committee receipts, debt servicing and cash management.
He stressed that the absence of fiscal dominance, where government borrowing pressures compel the central bank to monetise deficits, remains a critical requirement for the successful implementation of inflation targeting.
Abdullahi urged states to reduce reliance on overdrafts and short-term financing while ensuring that borrowing decisions align with debt sustainability thresholds.
He also called for improved budget realism, enhanced revenue forecasting, expenditure prioritisation and better alignment of fiscal activities with prevailing macroeconomic conditions.
The CBN official outlined four major responsibilities expected of state governments under the new framework, including maintaining fiscal discipline and predictability, pursuing responsible borrowing practices, strengthening coordination on cash and debt management, and enhancing internally generated revenue mobilisation.
He cautioned that unplanned expenditures, excessive supplementary budgets and unsustainable debt accumulation could trigger liquidity shocks and heighten inflationary pressures across the economy.
Abdullahi described inflation targeting as a collective national commitment that requires cooperation among all tiers of government to achieve sustainable price stability, economic growth and improved social welfare.
Earlier in his remarks, the Director of Monetary Policy Department at the apex bank, Victor Oboh, described inflation targeting as a “win-win framework” capable of benefiting households, businesses and governments through improved policy credibility and reduced economic uncertainty.
Oboh noted that price stability cannot be achieved through monetary policy alone in a federal system such as Nigeria, stressing that state governments play a critical role through their spending patterns, borrowing activities and revenue mobilisation efforts.
According to him, the engagement was designed to deepen collaboration between the apex bank and state governments while promoting mutual understanding on the expectations and coordination mechanisms required for the success of the framework.
Delivering a goodwill message on behalf of the Director-General of the NGF, the Executive Director, Policy, Strategy and Research at the forum, Olalekan Yunusa, commended the leadership of the CBN for involving sub-national authorities early in the transition process.
Yunusa said the shift from monetary targeting to inflation targeting reflects a deliberate commitment to making price stability the central anchor of economic policy in Nigeria.
He added that sustainable macroeconomic stability would require disciplined coordination among all levels of government.
Participants at the engagement, drawn from more than 20 states and comprising Commissioners of Finance and Economic Planning, Accountant-Generals, Permanent Secretaries and State Statistician-Generals, reportedly pledged support for the CBN’s reform agenda and the successful implementation of the inflation-targeting framework.
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