FG, CBN sign MoU to improve fiscal and monetary policy coordination

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

The agreement is aimed at improving economic management and ensuring greater consistency in government policies.

The MoU was signed by the Federal Ministry of Finance and the CBN in Abuja on Friday. It provides a formal structure for regular meetings, information sharing and joint assessments of economic policies.

CBN Governor Olayemi Cardoso said the agreement would strengthen the existing relationship between the two institutions and improve their ability to respond to economic challenges.

He said the CBN and the Finance Ministry have worked together on issues including inflation, government debt, budget financing, exchange rate stability and responses to economic shocks.

Cardoso said the major difference was that the existing cooperation would now be formally backed by clear procedures.

Under the agreement, both institutions will work more closely on government cash management, debt issuance planning, liquidity forecasting, economic analysis and regular policy consultations.

According to Cardoso, the arrangement will create more predictable channels for communication and improve economic decision making.

He said the agreement was also important as the CBN continues its move towards an inflation targeting framework.

Cardoso explained that inflation targeting requires not only effective monetary policy but also a supportive fiscal environment.

Finance Minister and Coordinating Minister of the Economy, Taiwo Oyedele, said the MoU recognises the need for both institutions to work together while maintaining their separate responsibilities.

Oyedele said good economic management requires institutions to be independent, but that independence should not prevent them from working together.

He explained that the policies of the government and the CBN are closely connected.

According to him, government borrowing can affect liquidity and interest rates, while monetary policy can influence the cost of government borrowing.

He added that tariffs and exchange rates can affect prices and government revenue, while government spending can influence demand in the economy.

Oyedele said the MoU is not creating cooperation between the two institutions from scratch. He noted that existing platforms, including the Economic Management Team and National Economic Council, already provide avenues for coordination.

The agreement is expected to help the government and the CBN better align their economic policies and reduce conflicts between fiscal and monetary measures.