Nigeria’s fight against inflation could face renewed setbacks if fiscal spending remains unchecked, particularly during politically sensitive periods, a member of the Central Bank of Nigeria’s Monetary Policy Committee, Professor Murtala Sabo Sagagi, has warned.
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Sagagi made the remarks in his personal statement following the 304th Monetary Policy Committee meeting held in February, where policymakers reviewed domestic inflation trends, monetary tightening measures, and broader macroeconomic conditions.
His comments come as Nigeria continues efforts to stabilise prices, manage exchange rate pressures, and sustain recent disinflation gains amid persistent economic challenges.
What Sagagi is saying
Sagagi warned that stronger coordination between fiscal and monetary authorities is necessary to sustain recent progress in slowing inflationary pressures.
- “Close coordination between monetary and fiscal policy is essential.”
- “Increased fiscal releases associated with electoral cycles could reverse disinflation gains. The CBN should maintain dialogue with the fiscal authorities to ensure more responsible spending.”
- “The CBN should monitor the pass-through of rate reductions to lending rates closely.”
- “The persistence of elevated bank lending rates despite monetary easing would suggest structural impediments in the transmission mechanism that require targeted macroprudential action.”
He also stressed that insecurity and structural weaknesses in agriculture continue to pose significant risks to price stability and economic recovery.
Get up to speed
CBN has maintained a tight monetary policy stance over the past year as the apex bank attempts to curb inflation and stabilise the economy following subsidy reforms, exchange rate volatility, and rising food prices.
Sagagi noted that despite signs that inflationary pressures may be moderating, the gains remain fragile due to underlying structural constraints across the economy.
- He raised concerns that politically driven fiscal spending could weaken the impact of monetary tightening and increase inflationary pressures.
- He also warned that high commercial lending rates continue to constrain businesses despite adjustments to benchmark interest rates by the central bank.
- According to him, insecurity across farming communities remains a major challenge to food supply, productivity, and agricultural output.
- He added that many farmers continue to struggle with rising production costs, including fertilizers, seedlings, and pesticides, despite declining commodity prices.
Sagagi further called for stronger financial oversight of security agencies to ensure resources are efficiently utilised in addressing insecurity and improving operational effectiveness.
What you should know
The MPC said the decision to cut the benchmark rate was driven by sustained improvements in key macroeconomic indicators, particularly inflation.
- The Cash Reserve Ratio was retained at 45.0% for commercial banks and 16.0 per cent for merchant banks.
- The Liquidity Ratio was maintained at 30.0%.
- The Standing Facilities Corridor was fixed at +50/-450 basis points around the MPR.
National Bureau of Statistics (NBS) reported that Nigeria’s headline inflation rate increased to 15.38% in March 2026, up from 15.06% recorded in February.
The latest remarks highlight growing concerns within the Monetary Policy Committee that monetary tightening alone may not be sufficient to stabilise prices unless supported by fiscal discipline and broader structural reforms.
