The Central Bank of Nigeria has urged state governments to reduce their reliance on overdrafts and short-term borrowing, warning that reckless fiscal behaviour at the sub-national level could undermine the country’s transition to an inflation-targeting monetary policy framework.
This was contained in a press statement issued by the CBN on Sunday following an engagement with sub-national stakeholders facilitated through the Nigerian Governors’ Forum Secretariat in Abuja.
According to the statement, the Deputy Governor in charge of the Economic Policy Directorate, Muhammad Abdullahi, said state governments must adopt stricter fiscal discipline to support price stability and ongoing macroeconomic reforms.
He urged states to reduce reliance on overdrafts and short-term financing, ensure that borrowing decisions align with debt sustainability thresholds, improve budget realism and revenue forecasting, prioritise expenditure, and better synchronise fiscal calendars with prevailing macroeconomic conditions,” the statement said.
Abdullahi described the transition to inflation targeting as a shift towards a more transparent, rule-based, and forward-looking monetary framework that requires close collaboration between the central bank and state authorities.
According to him, while the CBN remains responsible for monetary policy decisions aimed at controlling inflation, fiscal actions by state governments also significantly influence inflation outcomes in a federal system like Nigeria’s.
