CBN cautions governors against election-year spending spree

…says excess spending could destabilise reform gains

As Nigeria prepares for a new election cycle, Olayemi Cardoso, the Governor of the Central Bank of Nigeria (CBN), has urged state governors to maintain fiscal discipline and avoid frivolous spending, as such outflows could destabilise the impact of reforms that have successfully restored stability to the economy.

Cardoso stated this at the National Economic Council (NEC) Conference held in Abuja on Monday.

According to the Governor, the Bank’s reforms have established a foundation for economic stability, evidenced by a significant reduction in inflation and growing external reserves, which currently stand at $49 billion.

He also highlighted the stability of the foreign exchange (FX) market, noting that the CBN is now accumulating foreign exchange from the market to enhance sustainability.

Cardoso explained that state governments significantly impact macroeconomic stability, as they control approximately 50 per cent of Federation Account Allocation Committee (FAAC) revenues. This influence, he noted, determines macroeconomic outcomes, price and exchange rate stability, liquidity management, and poverty levels.

“States collectively influence expenditure patterns, wage bills, infrastructure decisions, and liquidity conditions across the economy. Revenue capacity has expanded post-reforms, and subnationals now drive inflation and supply-side outcomes.

“As we know, in a typical election cycle, a lot of money gets pumped into the system. This has to be watched to ensure it does not destabilise these very bold reforms, which have brought about stability to the economy.

“I will say here that monetary policy is a necessary but insufficient tool. It can take us to where we have gotten to now, but it is no substitute for economic fundamentals. No central bank can sustainably deliver low and stable inflation alone where structural drivers—such as food supply shocks, high energy costs, and infrastructural deficits—are large contributors to price pressures,” Cardoso said.

The Governor urged state governments to align with the national economic stability agenda by prioritising infrastructure and public expenditure that reduces the structural drivers of inflation.

He also emphasised the need for sustainable subnational debt management and partnerships with the financial system to promote financial inclusion and stimulate economic activity.

“Our priority for 2026 to 2030 is strengthening monetary policy effectiveness through an orthodox approach. In other words, we will continue the discipline we have established: safeguarding financial stability, deepening domestic financial markets, and enhancing international competitiveness.

“Despite our progress, I would caution that we are not out of the woods yet. We must remain focused to ensure all potential headwinds and risks are seen in advance and managed appropriately. By 2030, we expect success to look like single-digit inflation and growing foreign exchange reserves powered by non-oil exports and FDI,” he added.