The Central Bank of Nigeria (CBN) has cautioned state governors that unpredictable fiscal policies at the sub-national level could frustrate efforts to achieve price stability under the country’s inflation-targeting framework.
The warning was issued during a recent engagement between the apex bank and the Nigeria Governors’ Forum (NGF), as both institutions intensified collaboration aimed at strengthening inflation control measures nationwide.
In a statement issued by the CBN, the Deputy Governor in charge of the Economic Policy Directorate, Muhammad Abdullahi, said Nigeria’s transition to an inflation-targeting regime represents a shift toward a more transparent, rule-based, and forward-looking monetary policy system that requires strong coordination with state governments.
Abdullahi explained that although the CBN remains responsible for deploying monetary policy tools to manage inflation, fiscal decisions taken by state governments significantly influence inflation outcomes.
He added that inflation targeting largely depends on managing public expectations, stressing that expansionary or poorly coordinated fiscal activities by states could weaken the impact of monetary policy measures.
Moreso, he identified several channels through which states affect inflation, including borrowing patterns, rising domestic debt, spending behavior, wage obligations, execution of capital projects, salary arrears, contractor financing, overdrafts, and weak coordination on Federation Account Allocation Committee, FAAC, receipts, debt servicing, and cash management.
“In an inflation-targeting regime, persistent, unpredictable, or expansionary fiscal behavior at the sub-national level can significantly undermine price stability,” Abdullahi said.
The director general of the NGF, Abdullateef Shittu, commended the apex bank and its leadership for what he described as the strategic foresight behind the engagement.
Nigeria’s headline inflation rose to 15.38 per cent in March 2026, while food inflation stood at 14.31 per cent.
