CBN Urges States to Curb Spending to Tackle Rising Inflation
By Patience Ikpeme
The Central Bank of Nigeria (CBN) has sent a clear message to state governments: your spending habits and borrowing choices are major factors driving the high cost of living across the country.
During a meeting with state officials and the Nigeria Governors’ Forum (NGF) Secretariat, the CBN Deputy Governor for Economic Policy, Dr. Muhammad Sani Abdullahi, explained that how states manage their money directly affects inflation.
He pointed out that when states borrow too much, pile up domestic debts, or spend money in ways that are not planned for, it makes it harder to keep prices stable for the average citizen. He also noted that things like unpaid salaries, bank overdrafts, and how states handle their monthly FAAC allocations all play a role in the rising cost of goods and services.
Dr. Abdullahi urged state leaders to stop relying so much on short-term bank loans and “overdrafts.” Instead, he advised them to make sure their borrowing is sustainable and to do a better job of predicting how much revenue they will actually make. He suggested that states must prioritize their spending and make sure their financial plans match the reality of the country’s economy.
To help bring prices down, the CBN is moving to a system called “Inflation Targeting.” Dr. Abdullahi said for this to work, states have four main jobs: keeping their spending disciplined, borrowing responsibly, managing their debts better, and finding more ways to generate their own internal revenue instead of just waiting for federal money.
“In a system where we are trying to control inflation, if state governments keep spending in an unpredictable or excessive way, it can push prices even higher,” Dr. Abdullahi said. He explained that while the CBN has the tools to control money flow, the actions of state governments in a country like Nigeria are just as important in deciding whether prices go up or down.
One major warning from the Deputy Governor was about “fiscal dominance”—a situation where the government borrows so much that the Central Bank is forced to print more money to cover the gap. He warned that this must not happen at either the federal or state level. He noted that unplanned spending and huge extra budgets can cause sudden shocks to the economy, making inflation worse for everyone.
“Controlling inflation is a national task that requires everyone to be on the same page. While the CBN is responsible for price stability, the success of our plan depends on disciplined spending across all levels of government,” he added.
Supporting this view, Dr. Victor Oboh, the Director of the Monetary Policy Department, described the plan as a “win-win” for all Nigerians. He said the goal is to make the economy more predictable so that businesses and families can plan their lives without the fear of prices jumping every day.
He stated that the Central Bank cannot fight inflation alone and needs states to be careful with how they handle wage policies and large construction projects.
On behalf of the governors, Prof. Olalekan Yunusa from the Nigeria Governors’ Forum praised the CBN for involving the states early in this new plan. He agreed that the shift toward focusing strictly on inflation is a deliberate move to make sure prices stay under control. He acknowledged that the Central Bank’s efforts will only work if there is teamwork and discipline from the state governments.
The meeting included finance commissioners and top officials from over 20 states. These officials agreed to support the CBN’s new reforms, acknowledging that better financial management at the state level is the only way to create jobs and improve the welfare of Nigerians.
