CBN Rallies State Governments for Inflation Targeting Reform to Stabilise Nigeria’s Economy

The Central Bank of Nigeria (CBN) has called on state governments to play a stronger role in supporting the country’s shift toward an inflation-targeting monetary policy framework. The apex bank stressed that achieving long-term price stability will require coordinated fiscal discipline across all levels of government.

Speaking at an engagement session organised through the Nigerian Governors’ Forum (NGF) secretariat, Dr. Muhammad Sani Abdullahi, Deputy Governor in charge of the Economic Policy Directorate, explained that the new framework is designed to be more transparent, rule-based, and forward-looking. He noted that its success depends heavily on collaboration between the federal and state governments.

Dr. Abdullahi warned that inconsistent or expansionary fiscal practices at the sub-national level could weaken monetary policy efforts. He highlighted areas such as borrowing decisions, wage obligations, debt accumulation, and spending patterns as key drivers that can influence inflation across the country.

He further explained that states must prioritise fiscal discipline by reducing reliance on overdrafts, improving revenue generation, aligning borrowing with sustainable debt levels, and ensuring better coordination of budgets and cash flow management. According to him, uncontrolled spending or excessive debt could trigger liquidity pressures and fuel inflation.

Also speaking, Dr. Victor Oboh, Director of the Monetary Policy Department, described inflation targeting as a “win-win framework” that enhances economic stability and strengthens policy credibility. He stressed that monetary policy alone cannot control inflation, especially in a federal system where state-level fiscal decisions significantly affect national economic outcomes.

The Nigerian Governors’ Forum, represented by Prof. Olalekan Yunusa, praised the CBN’s reform direction under Governor Olayemi Cardoso, noting that involving states early in the transition process is a strategic move. Participants from over 20 states reaffirmed their support for the initiative, pledging cooperation to ensure its success across the federation.

source: Leadership