CBN Retains independence despite closer coordination with FG

By Daily Hibiscus Mews

The Central Bank of Nigeria (CBN) will retain its operational independence in setting monetary policy despite a new framework for closer coordination and cooperation with the Federal Government on fiscal and monetary policies.

Minister of Finance and Coordinating Minister of the Economy, Taiwo Oyedele, gave the assurance at the signing of a Memorandum of Understanding (MoU) between the Federal Ministry of Finance and the CBN on fiscal and monetary policy coordination.

Oyedele said the agreement was designed to strengthen cooperation between the two institutions without allowing fiscal policy considerations to interfere with the CBN’s responsibility for price and financial system stability.

So this is independence with coordination. The operational independence of the central bank remains sacrosanct. Coordination must never become fiscal dominance,” he said.

According to him, the CBN would continue to have full independence in pursuing price and financial system stability, while the Federal Ministry of Finance would strengthen fiscal governance, accountability, cash management and other areas under its mandate.

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,” he said.

Oyedele explained that decisions taken by one institution could have direct consequences for the other, making regular communication necessary.

“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,” he said.