A member of the Central Bank of Nigeria’s (CBN) Monetary Policy Committee (MPC), Murtala Sagagi, has raised concerns over excessive government spending, arguing that it poses a significant challenge to the effectiveness of Nigeria’s monetary policy. In a personal statement following the 298th MPC meeting, Sagagi highlighted that unchecked fiscal expenditure is undermining efforts to achieve stable inflation and exchange rates, despite the central bank’s best efforts.
Sagagi pointed out that structural rigidities and weak institutions continue to hinder economic growth in Nigeria. Despite various reforms introduced by the government, he stressed that legacy issues still constrain the nation’s economic development. According to him, without addressing these fundamental challenges, Nigeria’s goal of becoming a one-trillion-dollar economy remains distant, and progress toward achieving macroeconomic stability could be stifled.
Both Sagagi and fellow MPC member Philip Ikeazor have underscored the critical need for better coordination between fiscal and monetary authorities. Sagagi warned that the current lack of synergy is eroding the impact of monetary policies aimed at stabilizing the economy. He emphasized that for inflation to be effectively controlled and the naira stabilized, fiscal discipline must improve significantly.
Ikeazor also expressed concerns about the role of subnational governments in exacerbating inflationary pressures. He cited fiscal injections by state governments as a major contributor to inflation persistence, noting that unless these fiscal actions are curtailed, efforts to manage inflation and stabilize the economy through monetary tightening will continue to fall short. Ikeazor had previously supported a more aggressive interest rate hike in response to this issue.
Both MPC members called on the federal government to exercise greater fiscal prudence. They advocated for reducing recurrent expenditures and refocusing government spending on capital investments that can drive productivity and economic resilience. While acknowledging the negative impact of monetary tightening on economic growth, both officials agreed that these measures are necessary to restore investor confidence and stabilize the Nigerian economy. The CBN’s next MPC meeting is scheduled for mid-February 2025, where further discussions on these issues are expected.
Source: PUNCH