September 23, 2026/CSL Update
The Federal Ministry of Finance and the Central Bank of Nigeria (CBN) have signed a Memorandum of Understanding (MoU) to institutionalise coordination between fiscal and monetary authorities. The framework provides for greater alignment of macroeconomic assumptions, forecasts and policy actions, alongside more structured information-sharing on inflation, GDP growth, government revenue, liquidity, financing requirements, and external-sector conditions. It also establishes mechanisms for addressing potential conflicts between fiscal and monetary measures, particularly as the CBN progresses towards an inflation-targeting framework.
A key component of the MoU is a closer coordination of government financing and cash management, aimed at limiting the risk of fiscal borrowing crowding out private sector credit. The framework also envisions a broader approach to managing inflation, combining disciplined government spending with targeted measures addressing food, energy, and logistics costs. This is particularly relevant given that inflationary pressures in Nigeria are influenced by both monetary and supply-side factors. The planned expansion of economic data, including producer prices, employment and productivity indicators, should also improve the quality of policy formulation and strengthen the CBN’s transition towards inflation targeting.
We see this development as a positive for the Nigerian economy particularly as improved coordination between the fiscal and monetary authorities could improve macroeconomic predictability, reduce contradictory policy signals and support investor confidence.
Notably, a closer coordination could help improve the timing and management of public-sector borrowing as it will enable the fiscal side of the economy better understand how their borrowing requirements affects the liquidity management objective of the monetary side of things and consequently help to better align the policies of both parties to avoid contradictory situations that we have previously seen when the CBN financed government deficit through its ways and means facility while simultaneously tightening rates to reduce liquidity in the economy in other to curb inflation.
The framework creates a stronger institutional basis for better policy consistency and coherence however its effectiveness will depend on implementation and the preservation of the CBN’s operational autonomy as excessive fiscal influence over monetary decisions could weaken policy credibility, while persistent fiscal expansion could undermine disinflation efforts.