CBN MPC member warns election-linked spending could undermine Nigeria’s inflation fight

A member of the Monetary Policy Committee (MPC) of the Central Bank of Nigeria (CBN), Professor Murtala Sabo Sagagi, has cautioned that Nigeria’s efforts to tame inflation could suffer setbacks if fiscal spending is not carefully managed — particularly during politically sensitive periods.

Sagagi made the remarks in his personal statement following the CBN’s 304th MPC meeting held in February, where policymakers reviewed inflation trends, monetary tightening measures, and broader macroeconomic conditions.

He stressed that recent disinflation gains remain fragile and warned that expansionary fiscal policies associated with electoral cycles could reverse progress achieved through monetary tightening.

“Close coordination between monetary and fiscal policy is essential,” Sagagi stated.

“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.”

His comments come as Nigeria continues to stabilise prices and manage exchange rate pressures amid lingering economic challenges, including subsidy reforms and volatile food prices.

Sagagi also raised concerns about the persistence of elevated commercial lending rates despite adjustments to benchmark interest rates by the apex bank.

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“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.”

At its 304th meeting, the MPC reduced the Monetary Policy Rate (MPR) by 50 basis points to 26.5 percent from 27 percent, citing sustained improvements in key macroeconomic indicators, particularly inflation.

The committee retained the Cash Reserve Ratio at 45 percent for commercial banks and 16 percent for merchant banks, while maintaining the Liquidity Ratio at 30 percent. The Standing Facilities Corridor was fixed at +50/-450 basis points around the MPR.

Despite earlier signs of moderation, fresh data from the National Bureau of Statistics (NBS) showed that Nigeria’s headline inflation rate rose to 15.38 percent in March 2026, up from 15.06 percent in February.

Sagagi attributed ongoing price pressures partly to insecurity and structural weaknesses in agriculture, which continue to constrain food supply and productivity.

He noted that many farmers still grapple with rising production costs, including fertilizers, seedlings and pesticides, even as commodity prices show signs of easing.

“Insecurity across farming communities remains a major challenge to food supply, productivity, and agricultural output,” he warned.

Beyond monetary measures, Sagagi called for improved financial oversight of security agencies to ensure that resources allocated to tackling insecurity are effectively utilised.

Analysts say his remarks reflect growing concern within the MPC that monetary tightening alone may not be sufficient to stabilise prices unless supported by fiscal discipline and structural reforms.

The warning comes at a time when Nigeria’s economic managers are balancing the need to sustain growth, manage debt pressures, and protect recent macroeconomic gains, while navigating political and social pressures ahead of future electoral cycles.