Finance Ministry, CBN Sign MoU to Strengthen Fiscal, Monetary Policy Coordination
The Federal Ministry of Finance and the Central Bank of Nigeria (CBN) have signed a Memorandum of Understanding (MoU) to strengthen coordination between fiscal and monetary policies and promote greater economic stability.
The agreement is designed to institutionalise closer collaboration between the two institutions through improved information sharing, aligned macroeconomic assumptions, consistent economic forecasts and clearer mechanisms for resolving potential conflicts between fiscal and monetary policies.
The Minister of Finance and Coordinating Minister of the Economy, Taiwo Oyedele, disclosed this at the signing ceremony in Abuja, stressing that the framework would make fiscal and monetary policy coordination a permanent feature of Nigeria’s economic management rather than one dependent on individual personalities.
Oyedele noted that although the Ministry of Finance and the CBN have distinct mandates and must maintain their institutional independence, their policies ultimately affect the same economy and therefore require effective coordination.
He explained that government borrowing has implications for liquidity, interest rates and financing costs, while monetary policy decisions also affect government finances.
According to him, exchange rates, tariffs, government spending and agricultural policies similarly have direct consequences for prices, government revenue and economic activity.
The Minister identified the sustainable reduction of inflation to single digits as a major objective of the new framework, noting that the target could not be achieved through monetary policy alone.
He said the Ministry of Finance would contribute through disciplined spending, sound cash and liquidity management and more efficient government financing, while fiscal interventions would focus on structural drivers of inflation, particularly food, energy, imported costs and logistics.
On food inflation, Oyedele said the Ministry would collaborate with relevant institutions and state governments to strengthen grain reserves, improve agricultural yields and irrigation, build climate resilience and address gaps in farm-to-market infrastructure.
The Minister also ruled out a return to fuel subsidy, arguing that such a policy would place additional pressure on public finances and the naira.
He said improved foreign exchange stability and tax exemptions on fuel had contributed to moderating fuel prices.
Oyedele further emphasised the importance of reliable economic data in improving policy coordination, saying the Ministry was working with the National Bureau of Statistics (NBS) to expand the quality and range of data available for economic decision-making.
Under the new framework, the Ministry and the CBN will enhance information sharing on government cash positions, financing plans, credit growth and foreign exchange flows.
“Better coordination starts with a common evidence base,” Oyedele said.
The Minister said recent economic developments indicated strengthening confidence in the Nigerian economy, citing a balance of payments surplus of more than $5 billion in 2025 and external reserves exceeding $54 billion.
He also pointed to increased non-oil exports, declining refined-product imports as domestic refining capacity expands, Nigeria’s return to Frontier Market status and its inclusion in JPMorgan’s new frontier local-currency government bond index.
However, Oyedele said the government’s objective went beyond attracting short-term portfolio investments, stressing the need for patient capital capable of supporting factories, infrastructure, technology and job creation.
He said achieving this would require policy consistency, greater certainty and a regulatory environment that avoids imposing unnecessary burdens on businesses.
The Minister added that the coordination framework would also take into account the economic consequences of insecurity and illicit financial flows.
Oyedele said the Federal Ministry of Finance would continue to focus on fiscal discipline, improved liquidity management, greater transparency, stronger data systems, more efficient financing and reforms aimed at increasing production and addressing structural sources of inflation.
“Nigeria has one economy. Fiscal policy cannot succeed without price stability; monetary policy cannot deliver price stability if fiscal policy pulls in the opposite direction,” he said.
Speaking at the ceremony, CBN Governor Olayemi Cardoso described the agreement as a significant step towards strengthening Nigeria’s macroeconomic management and economic stability.
Cardoso said fiscal and monetary policies were complementary instruments whose combined impact would be stronger when both institutions work in harmony.
He clarified that the MoU did not establish a new relationship between the two institutions, noting that the Ministry and the CBN have collaborated for decades on inflation management, debt sustainability, budget financing, exchange rate stability and responses to economic shocks.
Rather, he said, the agreement formalises the longstanding collaboration through structured processes for regular consultation, information exchange and policy coordination.
According to Cardoso, the framework will strengthen cooperation in areas including government cash management, debt issuance planning, liquidity forecasting, macroeconomic analysis and periodic policy consultations.
He said the timing was particularly important as the CBN advances its transition towards an inflation-targeting framework, adding that the effectiveness of such a framework also depends on a supportive fiscal environment.
The CBN Governor commended Oyedele and the technical teams from both institutions for their roles in developing the initiative.
He reaffirmed the apex bank’s commitment to sound monetary policy, macroeconomic stability and financial system resilience, saying the strengthened partnership would contribute to a more stable and resilient Nigerian economy capable of creating greater opportunities for citizens.
