305th MPC meeting: CPPE warns against further interest rate hike

The Centre for the Promotion of Private Enterprise (CPPE) has warned Central Bank of Nigeria’s Monetary Policy Committee (MPC) ahead of its 305th meeting, cautioning against any further tightening of monetary policy.

CPPE Chief Executive Officer, Dr. Muda Yusuf, stated that additional interest rate hikes could severely damage Nigeria’s fragile economic growth, stifle private sector investments, and trigger widespread loan defaults.

The policy think-tank acknowledged the complex macroeconomic pressures currently facing the central bank.

Globally, escalating geopolitical tensions involving the United States, Israel, and Iran have introduced fresh volatility into energy markets, driving up domestic production, transport, and logistics costs.

Domestically, the central bank must contend with heightened liquidity risks stemming from improved statutory allocations to state governments and early political spending ahead of the 2027 electoral cycle.

While these factors may push the MPC to maintain or intensify its aggressive monetary stance to preserve policy credibility, the CPPE argues that such a move would be counterproductive.

According to the statement, Nigeria’s current inflationary spiral is fundamentally a structural, supply-side issue rather than a result of excess consumer demand.

The primary drivers of inflation remain high energy costs, transport bottlenecks, and severe infrastructure deficits. Conventional monetary tightening is designed to curb demand-pull inflation, applying it to supply-side shocks will only increase the cost of capital, weaken manufacturing competitiveness, suppress small business growth, and worsen sovereign debt service pressures without effectively lowering prices.

The CPPE concluded by urging the monetary authorities to move away from rigid economic orthodoxy and instead adopt a pragmatic framework that balances price stability with economic growth.

Dr. Yusuf emphasized that sustainable, long-term inflation management will depend entirely on supply-side reforms, including boosting domestic petroleum refining capacity, improving energy security, stabilizing the exchange rate, and enhancing overall national productivity.