Keypoints
- The Centre for the Promotion of Private Enterprise (CPPE) has urged the Central Bank of Nigeria to avoid further interest rate hikes.
- The call comes ahead of the CBN’s 305th Monetary Policy Committee meeting scheduled for May 19 and May 20.
- CPPE Chief Executive Officer Muda Yusuf warned that higher borrowing costs could weaken economic growth, investment, and job creation.
- Yusuf noted that global oil market volatility from Middle East geopolitical tensions is already increasing domestic logistics and production costs.
- The think tank emphasized that Nigeria’s inflation is structural and cost-push in nature, making monetary tightening less effective.
Main Story
The Centre for the Promotion of Private Enterprise has urged the Central Bank of Nigeria to avoid further monetary tightening at its 305th Monetary Policy Committee meeting.
The Chief Executive Officer of CPPE, Dr Muda Yusuf, made the call in a statement on Sunday, warning that higher interest rates could weaken economic growth, investment, and job creation.
The News Agency of Nigeria reports that the MPC meeting is scheduled to take place between May 19 and May 20.
The report indicated that Yusuf identified external and domestic factors altering the current economic landscape. He stated that geopolitical tensions involving the U.S., Israel, and Iran had triggered renewed volatility in the global oil market, pushing crude oil prices higher and worsening inflation through elevated logistics expenses.
Domestically, Yusuf noted that stronger Federation Account Allocation Committee disbursements to states and election-related spending ahead of the 2027 general elections posed additional inflationary risks, but cautioned that excessively high borrowing costs would increase loan defaults and suppress small business growth.
The Issues
- Applying aggressive demand-side monetary tools to combat cost-push inflation fails to address the underlying structural bottlenecks driving up commodity prices.
- Excessively high interest rates increase the cost of capital for domestic manufacturers, severely reducing their competitiveness against cheaper imported alternatives.
- Rising sovereign debt service obligations face further strain when domestic interest rates are pushed upward, tightening the fiscal space for infrastructure development.
What’s Being Said
- “Monetary tightening is less effective in addressing cost-push inflation than demand-driven inflation,” Dr Muda Yusuf stated in the analysis.
- Yusuf noted that the MPC might be inclined to retain its current tight monetary stance “to contain inflation expectations and sustain investor confidence.”
- He added that “growing political spending and stronger Federation Account Allocation Committee (FAAC) disbursements to states posed additional inflationary risks.”
- The CPPE chief executive emphasized that sustainable inflation moderation would depend more on “productivity growth, energy security, exchange rate stability, domestic refining capacity and broader structural reforms than aggressive monetary tightening.”
What’s Next
- Monetary Policy Committee members will assemble on Tuesday to deliberate on whether to hold, loosen, or further tighten the benchmark interest rate.
- Manufacturing associations and private sector groups will monitor the policy outcome to adjust their corporate borrowing and capital expenditure budgets.
- Fiscal authorities will likely face renewed calls from the business community to fast-track structural reforms in energy supply and transport logistics to ease non-monetary inflation.
Bottom Line
Ahead of the 305th MPC meeting, the CPPE has strongly advised the central bank against further interest rate hikes, arguing that Nigeria’s inflationary pressures require structural productivity interventions rather than continuous monetary tightening that risks suffocating private sector growth.
