Uwaleke Seeks Amendment of CBN Act to Strengthen Monetary, Fiscal Policy Coordination

Nasarawa State University Professor Uche Uwaleke, a Capital Market Academics of Nigeria (CMAN) Director and Institute of Capital Market Studies (ICMS) member, has called for amending the Central Bank of Nigeria (CBN) Act, 2007. This initiative aims to establish a transparent framework to strengthen fiscal and monetary policy coordination, according to an article he shared titled 'Beyond the MoU: Building a Coherent Fiscal-Monetary Policy Framework.'

Uwaleke emphasized that while the recent Memorandum of Understanding (MoU) between the Federal Ministry of Finance and the CBN is an important step, it should ultimately be based on clear statutory provisions. He suggested that Nigeria could review and amend relevant provisions of the CBN Act, 2007 and other fiscal-governance legislation to create a framework that clearly outlines the responsibilities of fiscal and monetary authorities, sets broad inflation objectives, and protects the CBN's autonomy.

The professor stressed that the MoU establishes mechanisms for information-sharing, aligned macroeconomic assumptions, and resolves areas where fiscal and monetary actions might interfere. However, he stressed that it should not grant fiscal authorities the power to dictate monetary policy decisions. Instead, the legislation should codify the distinction between shared macroeconomic objectives and independent policy instruments.

Uwaleke highlighted the urgency of this institutional question, given Nigeria's current circumstances. He emphasized that monetary and fiscal policies, while administered by different institutions, affect many of the same variables. The MoU is significant as it recognizes that price stability cannot be achieved by monetary policy alone and needs fiscal policy support.

The professor stressed that coordination should not imply the subordination of the CBN to the fiscal authority, stressing that central-bank independence doesn't mean operating in an economic vacuum.

He clarified that central bank independence means retaining the freedom to determine instruments and timing to achieve policy objectives without undue political pressure. He noted that international experience demonstrates that central bank independence does not require complete goal independence. Nigeria's government or legislature could establish broad monetary-policy objectives or inflation targets, while the CBN retains substantial independence over how those objectives are achieved.

This arrangement would strengthen democratic accountability and ensure a credible inflation-targeting framework.