The Central Bank of Nigeria has cautioned state governments against excessive borrowing and dependence on overdrafts, warning that poor fiscal management could frustrate efforts to stabilise inflation and strengthen the nation’s economy.
The warning was issued during a meeting with sub-national stakeholders organised through the Nigerian Governors’ Forum Secretariat in Abuja.
Speaking at the engagement, the CBN Deputy Governor for Economic Policy, Muhammad Abdullahi, urged states to embrace stricter financial discipline to support the country’s planned inflation-targeting policy framework.
He advised state governments to reduce short-term borrowing, align loans with sustainable debt limits, improve revenue projections, and prioritise spending based on available resources. Abdullahi also stressed the need for better coordination between fiscal activities at the state level and national economic policies.
According to him, inflation targeting requires a transparent and disciplined economic system where both the federal and state governments work together to control rising prices.
The deputy governor warned that uncontrolled spending, rising debt, salary arrears, and poorly managed projects at the state level could weaken the impact of the CBN’s monetary policies and worsen inflationary pressures.
He further noted that states must strengthen internally generated revenue and avoid unplanned expenditures capable of creating liquidity shocks in the economy.
Also speaking, the Director of the Monetary Policy Department, Victor Oboh, described inflation targeting as a beneficial framework that could improve economic stability, boost investor confidence, and reduce uncertainty for businesses and households.
