The Federal Government and the Central Bank of Nigeria have signed a new fiscal-monetary policy agreement in Abuja on Friday, September 18, 2026, establishing a’s transition towards an inflation-targeting framework, with both institutions seeking greater policy coherence without compromising the central bank’s operational framework for coordinating policies on inflation, public debt, government borrowing, liquidity and foreign exchange management.

The Memorandum of Understanding was signed as the CBN advances Nigeria’s transition towards an inflation-targeting framework, with both institutions seeking greater policy coherence without compromising the central bank’s operational independence.

Also read: Nigeria hits 17-year reserve high as CBN records $52.5bn

CBN Governor Olayemi Cardoso said the agreement would strengthen cooperation in government cash management, debt issuance planning, liquidity forecasting, macroeconomic analysis and regular policy consultations.

“This Memorandum provides a structured framework for regular consultation, information exchange and policy coordination,” Cardoso said.

The governor said fiscal and monetary policies were closely connected because government spending, taxation and borrowing influence economic activity, while monetary policy affects liquidity, interest rates and price stability.

Cardoso described the timing of the deal as particularly important as the apex bank works towards a formal inflation-targeting regime.

According to him, successful inflation targeting requires monetary policy to operate alongside a supportive fiscal environment.

The Minister of Finance and Coordinating Minister of the Economy, Taiwo Oyedele, said the framework was intended to prevent fiscal and monetary decisions from working at cross-purposes.

Oyedele, however, stressed that closer cooperation would not amount to government control of monetary policy.

“The operational independence of the Central Bank remains sacrosanct. Coordination must never become fiscal dominance. The CBN will retain full independence in pursuing price and financial-system stability,” he said.

The minister said the government’s long-term objective was to reduce inflation sustainably to single digits, arguing that monetary policy alone could not resolve the country’s price pressures.

“Our objective is to bring inflation sustainably into single digits and keep it there, and that cannot be monetary policy‘s job alone,” Oyedele said.

He pointed to food prices, imported costs, energy and logistics as important structural contributors to inflation.

To address those pressures, Oyedele said the government would pursue measures including stronger grain reserves, improved agricultural yields, irrigation and better access roads to farms.

The minister also ruled out a return to fuel subsidy, arguing that reversing the policy could place additional pressure on government finances and the naira.

“A return to subsidy would create a fiscal collapse, pressure the naira, and ultimately undermine the price affordability it seeks to provide,” he said.

Under the new framework, the Ministry of Finance and the CBN are expected to improve the sharing of information on government cash positions, financing plans, credit growth and foreign exchange flows.

The CBN Deputy Governor, Corporate Services Directorate, Dr Muhammad Abdullahi, said the agreement was particularly relevant amid global economic uncertainty and geopolitical tensions.

Abdullahi pointed to developments in the Middle East and the potential impact of disruptions to energy and shipping routes on oil prices, government revenue, inflation, capital flows and financing conditions.

“This is why coordination matters. Coordination does not mean blurring respective mandates or compromising the independence required for effective monetary policy,” he said.

He said the framework would allow both institutions to undertake regular consultations, exchange information, conduct joint technical analysis and carry out scenario planning and stress tests.

The Permanent Secretary of the Federal Ministry of Finance, Raymond Omachi, said the agreement was designed to balance inflation control with economic growth.

Omachi said government borrowing plans would be better aligned with money-market liquidity management to reduce the risk of public borrowing crowding out credit to businesses.

“The core objective of the framework is inflation and growth balance,” he said.

The framework will also cover exchange-rate and revenue stability, foreign exchange management, resilience to external shocks and regular data sharing.

The agreement formalises a relationship that the Finance Ministry and the CBN have maintained over several decades in areas including inflation management, debt sustainability, budget financing, exchange-rate stability and responses to economic shocks.

Also read: Nigeria hits 17-year reserve high as CBN records $52.5bn

Its implementation will now be closely watched as Nigeria attempts to strengthen macroeconomic stability while maintaining access to financing and supporting private-sector activity.