CBN Urges States to Cut Overdraft Reliance for Stability

The Central Bank of Nigeria (CBN) has called on state governments to minimize their reliance on overdrafts and short-term borrowing, warning that reckless fiscal behavior at the sub-national level undermines the country's inflation targets and monetary policy framework. This statement was issued following an engagement with stakeholders at the Nigerian Governor Forum secretariat in Abuja, led by Deputy Governor Dr.

Muhammad Abdullahi. He emphasized the need for state governments to adopt stricter fiscal discipline, improve budget realism, and ensure borrowing decisions align with debt sustainability thresholds.

Abdullahi outlined four responsibilities for state governments within the inflation target framework, including maintaining fiscal discipline and improving cash and debt management. The CBN noted that state fiscal actions significantly influence inflation outcomes, and without fiscal discipline, the central bank may face pressure to monetize deficits, which could jeopardize inflation targets.

The engagement included participation from 20 states and highlighted the importance of collaboration between the CBN and state authorities.