The Central Bank of Nigeria has urged state governments to reduce their reliance on overdrafts and short-term borrowing,
‎
‎It warned 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, Dr Muhammad Abdullahi, said state governments must adopt stricter fiscal discipline to support price stability and macroeconomic reforms.
‎
‎Abdullahi described the transition to inflation targeting as a shift towards a more transparent, rule-based and forward-looking monetary framework that required close partnership between the central bank and state authorities.
‎
‎According to him, while the CBN remained responsible for monetary policy decisions aimed at controlling inflation, fiscal actions by state governments also influenced inflation outcomes in a federal system
‎
‎He further warned that inflation targeting largely depended on managing economic expectations, noting that expansionary fiscal activities by states could weaken the effectiveness of monetary policy signals.
Edited by Favour Owonibi.