By Joyce Ekeh
The Central Bank of Nigeria, CBN, and the Federal Ministry of Finance have signed a Memorandum of Understanding, MoU, to institutionalize monetary and fiscal policy coordination and strengthen macroeconomic stability.
The agreement, signed yesterday at the CBN headquarters in Abuja, was executed by the CBN Governor, Mr Olayemi Cardoso, and the Minister of Finance and Coordinating Minister of the Economy, Mr Taiwo Oyedele, on behalf of their respective institutions.
Speaking at the event, Cardoso said the agreement represented a shared commitment by both institutions to deepen collaboration in the interest of the Nigerian economy and the public.
He said fiscal and monetary policies were complementary instruments of economic management, with fiscal policy influencing economic activity through government expenditure, taxation and borrowing, while monetary policy focuses on price stability and financial system soundness through the management of liquidity, interest rates and monetary conditions.
According to him, “When these policies work in harmony, their combined impact is far greater than their individual efforts.”
The CBN governor stressed that the MoU did not create a new relationship between the two institutions, noting that they had collaborated for decades on critical macroeconomic issues, including inflation management, debt sustainability, budget financing, exchange rate stability, economic reform programmes and responses to domestic and global shocks.
He, however, said the new agreement would provide a formal framework for the relationship, ensuring that collaboration was no longer dependent on the discretion of individual office holders.
Cardoso said: “This Memorandum provides a structured framework for regular consultation, information exchange and policy coordination. It will strengthen collaboration in critical areas such as government cash management, debt issuance planning, liquidity forecasting, macroeconomic analysis and periodic policy consultations, thereby enhancing policy coherence and the effectiveness of economic management.
“It transforms a relationship built on practice into one anchored by clear processes and enduring institutional commitment.”
He said the framework would establish predictable mechanisms for engagement, improve decision-making, reduce uncertainty and strengthen the capacity of both institutions to respond to emerging economic challenges.
The governor also linked the timing of the agreement to the CBN’s transition towards an inflation-targeting framework, saying successful inflation targeting required not only effective monetary policy but also a supportive fiscal environment.
He said the MoU would provide the foundation for an operational framework to guide its implementation through regular dialogue, information sharing and coordinated policy assessments.
Cardoso said the ultimate objective was to build “a more stable, resilient and productive economy capable of delivering broad-based prosperity for present and future generations of Nigerians.”
Also speaking, Oyedele said close collaboration between fiscal and monetary authorities was necessary, while stressing that such coordination must not undermine the autonomy of either institution.
He said: “Good economic management requires independent institutions, but independence does not mean isolation. Fiscal and monetary authorities have distinct mandates, but we serve the same economy.
“Government borrowing affects liquidity and interest rates. Monetary policy affects the government’s financing cost. Tariffs and exchange rates affect prices and revenue. Spending affects demand. Our mandates are distinct, but our outcomes are interconnected. That is the philosophy behind this MOU. We are institutionalising coordination.”
Oyedele noted that the government already had mechanisms for economic coordination, including the Economic Management Team and National Economic Council, as well as legal linkages between the Ministry of Finance and the CBN.
He said the MoU would make those existing linkages more deliberate and effective through improved information sharing, aligned macroeconomic assumptions, more consistent forecasts and clearer mechanisms for resolving areas where fiscal and monetary actions could pull in different directions.
“The CBN Act provides for the bank’s autonomy, while its governance architecture includes representation from the Ministry of Finance,” he added.
