CBN MPC member warns fiscal spending, especially electoral-driven releases, could reverse Nigeria’s fragile disinflation and inflation gains.
A member of the Central Bank of Nigeria’s Monetary Policy Committee (MPC), Professor Murtala Sabo Sagagi, has warned that Nigeria’s efforts to curb inflation could be undermined if fiscal spending is not properly controlled, particularly during politically sensitive periods.
Sagagi made the warning in his personal statement following the 304th MPC meeting held in February, where members reviewed inflation trends, monetary policy decisions, and broader macroeconomic conditions.
He cautioned that recent progress in slowing inflation remains fragile and could be reversed without stronger coordination between fiscal and monetary authorities.
“Close coordination between monetary and fiscal policy is essential,” he said.
He further warned that election-related or politically driven spending could weaken the impact of monetary tightening.
“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,” Sagagi stated.
On monetary transmission, he noted that high lending rates remain a concern despite policy adjustments by the apex bank.“The CBN should monitor the pass-through of rate reductions to lending rates closely,” he said.
“The persistence of elevated bank lending rates despite monetary easing would suggest structural impediments in the transmission mechanism that require targeted macroprudential action,” he added.
Sagagi also identified insecurity and structural weaknesses in agriculture as major threats to price stability and economic recovery, noting that food production remains under pressure.
He warned that insecurity in farming communities continues to disrupt supply chains and reduce agricultural output, while rising production costs are further squeezing farmers despite easing commodity prices.
He also called for stronger financial oversight of security-related spending to improve efficiency and outcomes in addressing insecurity across the country.
The warning comes as the CBN maintains a tight monetary policy stance aimed at stabilising prices following subsidy reforms, exchange rate pressures, and persistent inflationary challenges.
At its 304th MPC meeting in February, the committee cut the Monetary Policy Rate (MPR) by 50 basis points to 26.5 per cent from 27 per cent, citing gradual improvements in macroeconomic indicators, particularly inflation.
The committee retained the Cash Reserve Ratio at 45.0 per cent for commercial banks and 16.0 per cent for merchant banks, while keeping the Liquidity Ratio at 30.0 per cent. The Standing Facilities Corridor was also maintained at +50/-450 basis points around the MPR.
However, recent data from the National Bureau of Statistics (NBS) showed that headline inflation rose to 15.38 per cent in March 2026, up from 15.06 per cent in February, underscoring persistent price pressures.
