Finance Ministry, CBN sign MoU to formalise fiscal-monetary policy coordination
Screenshot
Abdullateef Fowewe
The Federal Ministry of Finance and the Central Bank of Nigeria (CBN) on Friday signed a Memorandum of Understanding aimed at strengthening coordination between fiscal and monetary policies to support macroeconomic stability, curb inflation, and foster investment and job creation.
The agreement was signed by the Minister of Finance and Coordinating Minister of the Economy, Taiwo Oyedele, and CBN Governor Olayemi Cardoso.
According to the statement released by the Ministry, the framework is designed “to improve policy consistency, enhance information sharing, strengthen economic forecasting, and support efforts to sustainably reduce inflation while fostering investment, growth, and job creation.”
It further “institutionalises collaboration between the Federal Ministry of Finance and the Central Bank of Nigeria, reinforcing a shared commitment to sound economic management and long-term economic resilience.”
Oyedele said the MoU would make coordination more deliberate and less dependent on the personalities in key offices.
He emphasised that while fiscal and monetary authorities have distinct mandates, their outcomes are interconnected: “Government borrowing affects liquidity and interest rates. Monetary policy affects the government’s financing costs. Tariffs and exchange rates affect prices and revenue. Spending affects demand.”
He stressed that the arrangement preserves the CBN’s operational independence stressing, “This is independence with coordination. The operational independence of the central bank remains sacrosanct. Coordination must never become fiscal dominance.”
Cardoso described the signing as a milestone that transforms a decades-long working relationship into a formal, structured arrangement covering government cash management, debt-issuance planning, liquidity forecasting, macroeconomic analysis, and regular consultations.
“What distinguishes today’s event is the formal institutionalisation of that collaboration,” he said, noting its particular importance as the CBN advances toward an inflation-targeting framework, which requires a supportive fiscal environment.
Nigeria has long struggled with inconsistent alignment between fiscal and monetary policy.
Past episodes of fiscal dominance—including heavy reliance on central bank financing have complicated efforts to control inflation, stabilise the exchange rate, and manage public debt.
Policy misalignment has at times undermined investor confidence and the effectiveness of both spending decisions and interest-rate or liquidity measures.
