The Governor of the Central Bank of Nigeria (CBN), Olayemi Cardoso, has raised concerns about a potential inflationary surge following the recent increase in liquidity from the Federation Account Allocation Committee (FAAC) disbursements.
Speaking at the recent Monetary Policy Committee (MPC) meeting in Abuja, Cardoso noted that the sharp rise in FAAC allocations to federal, state, and local governments could inject excess liquidity into the economy, a key driver of inflationary pressure.
“While FAAC disbursements are crucial for funding government operations and development, the current surge in liquidity poses a significant inflationary risk,” Cardoso said. “It’s important we adopt complementary fiscal and monetary tools to manage the knock-on effects.”
This warning comes on the heels of Nigeria’s persistent inflation, which has remained above 30% in recent months. Analysts argue that rising consumer prices, coupled with a volatile exchange rate, are compounding the cost-of-living crisis for millions of Nigerians.
FAAC allocations for June 2025 reached unprecedented levels, buoyed by higher crude oil prices and improved revenue remittances. However, experts worry that the resulting liquidity may push up demand without a corresponding rise in supply, fuelling further inflation.
Cardoso emphasized the CBN’s commitment to price stability, stating that tighter monetary policies may be deployed to counter the effects of excess cash circulation in the economy.
The CBN’s MPC is expected to review interest rates and other monetary tools in its next sitting, with inflation control remaining a top priority.
