The Central Bank of Nigeria and the Nigerian Governors’ Forum have strengthened collaboration on the country’s transition to an Inflation Targeting (IT) monetary policy framework, with emphasis on coordinated fiscal discipline across all tiers of government to achieve sustainable price stability.
Nigeria’s inflation rate rose slightly to 15.38 per cent in March 2026 from 15.06 per cent in February, ending an 11-month disinflation trend. Food inflation, the largest component of the inflation basket, accelerated for a second month to 14.31 per cent from 12.12 per cent, while transport prices rose even more sharply, up 16.9 per cent from 14.7 per cent in February.
With the approaching campaign period during which political spending is expected to skyrocket as politicians prepare for the forthcoming 2027 general elections, the expenditure patterns and borrowings by sub-nationals could impact inflation rate, thereby creating the need for inflation targeting policy.
Speaking during an engagement with subnational stakeholders facilitated through the NGF Secretariat, the deputy governor in charge of the Economic Policy Directorate at the CBN, Muhammad Sani Abdullahi, described inflation targeting as a more transparent, rule-based and forward-looking monetary policy framework that requires strong alignment between monetary and fiscal authorities.
According to him, while the apex bank remains responsible for deploying monetary policy tools to control inflation, fiscal actions at the state level significantly influence inflation outcomes in a federal system such as Nigeria’s.
He warned that uncoordinated or expansionary fiscal behaviour by state governments could weaken monetary policy signals and undermine price stability under the proposed framework.
“In an inflation-targeting regime, persistent, unpredictable or expansionary fiscal behaviour at the sub-national level can significantly undermine price stability,” Abdullahi stated.
He explained that states influence inflation through borrowing decisions, domestic debt accumulation, expenditure patterns, wage obligations, capital project execution, salary arrears, contractor financing, and cash management practices linked to Federation Account Allocation Committee receipts and debt servicing.
The Deputy Governor stressed that the absence of fiscal dominance, where government borrowing pressures compel the central bank to monetise deficits, remains a key requirement for a successful inflation-targeting regime.
He urged State Governments to reduce reliance on overdrafts and short-term financing, improve budget realism and revenue forecasting, align borrowing with debt sustainability thresholds, prioritise expenditure, and synchronise fiscal activities with prevailing macroeconomic realities.
Under the proposed framework, Abdullahi outlined four major responsibilities for states, including maintaining fiscal discipline and predictability; pursuing responsible borrowing aligned with medium-term fiscal frameworks; strengthening cash and debt management coordination; and improving internally generated revenue mobilisation.
He warned that excessive supplementary budgets, unplanned spending and unsustainable debt accumulation could create liquidity shocks and intensify inflationary pressures.
According to him, inflation targeting represents a collective national commitment to macroeconomic stability, credibility and long-term prosperity, noting that the framework’s success depends on disciplined fiscal conduct across all levels of government.
Earlier in his remarks, the Director of the Monetary Policy Department at the CBN, Victor Oboh, described inflation targeting as a “win-win framework” capable of anchoring inflation expectations, improving policy credibility and reducing macroeconomic uncertainty for households, businesses and governments.
Oboh noted that price stability cannot be achieved through monetary policy alone, particularly within a federal structure where sub-national spending, borrowing and cash-flow decisions directly affect liquidity conditions and inflation trends.
He explained that the engagement was designed to deepen collaboration, foster mutual understanding and establish clearer coordination mechanisms between the apex bank and State Governments as Nigeria transitions to inflation targeting.
Delivering a goodwill message on behalf of the Director-General of the NGF, Abdullateef Shittu, the Executive Director of Policy, Strategy and Research at the NGF, Olalekan Yunusa, commended the leadership of the CBN for involving sub-national fiscal authorities early in the transition process.
Yunusa said the move from monetary targeting to inflation targeting demonstrates a deliberate commitment to making price stability the central anchor of Nigeria’s economic policy framework.
He added that sustainable macroeconomic stability requires coordinated and disciplined policy implementation across all tiers of government.
The engagement featured detailed presentations on Nigeria’s transition to inflation targeting and drew participants from more than 20 states, including Commissioners of Finance and Economic Planning, Accountant-Generals, Permanent Secretaries, State Statistician-Generals and other senior officials.
Participants commended the CBN’s reform agenda and reaffirmed their commitment to supporting the successful implementation of the inflation-targeting framework.
Comments are closed.