The Central Bank of Nigeria has cautioned state governors that erratic fiscal policies at the sub‑national level could derail the country’s inflation‑targeting agenda. The warning was issued during a recent meeting between the apex bank and the Nigerian Governors Forum (NGF), where both parties affirmed their commitment to tighter coordination on price‑stability measures.
Deputy Governor for Economic Policy, Muhammad Abdullahi, told the gathering that Nigeria’s shift to an inflation‑targeting regime marks a move toward a more transparent, rule‑based and forward‑looking monetary policy framework. While the CBN retains the primary tools for managing inflation, Abdullahi stressed that fiscal decisions taken by states have a material impact on inflation outcomes.
“Inflation targeting hinges on managing public expectations,” Abdullahi said. “Expansionary or poorly coordinated fiscal actions by sub‑national governments can blunt the effect of monetary policy.” He identified a range of channels through which state behaviour influences price dynamics, including borrowing trends, growing domestic debt, spending patterns, wage commitments, capital‑project execution, salary arrears, contractor financing, overdrafts, and weak coordination on Federation Account Allocation Committee (FAAC) receipts, debt servicing and cash management.
Abdullahi warned that persistent, unpredictable or expansionary fiscal conduct at the state level could “significantly undermine price stability” under the new regime. The CBN’s message underscores the need for a concerted fiscal‑monetary partnership to anchor inflation expectations and achieve the target range set by the central bank.
Abdulateef Shittu, director general of the NGF, welcomed the engagement, commending the CBN’s strategic foresight in bringing governors into the discussion. The dialogue reflects a broader effort to align sub‑national budgeting with national macro‑economic objectives.
Nigeria’s headline inflation eased to 15.38 percent in March 2026, while food inflation stood at 14.31 percent, figures that remain well above the central bank’s target band. The exchange highlights the delicate balance policymakers face: while the CBN can adjust interest rates and liquidity, state‑level fiscal expansion can offset those measures, prolonging high price pressures.
The interaction between the CBN and the NGF signals a shift toward more disciplined fiscal discipline across the federation. Analysts note that improved coordination could help curb inflationary spirals, bolster the credibility of the inflation‑targeting framework and support broader macro‑economic stability.
Going forward, the central bank is expected to monitor state borrowing and spending closely, while the NGF is likely to reinforce adherence to the FAAC allocation formula and promote better cash‑management practices among governors. The success of this collaborative approach will be a key determinant of whether Nigeria can bring inflation down to sustainable levels and preserve the purchasing power of its citizens.
