The Centre for the Promotion of Private Enterprise (CPPE) has described the decision by the Monetary Policy Committee (MPC) of the Central Bank of Nigeria (CBN) to retain key monetary policy parameters as “pragmatic” and reflective of a deeper understanding of Nigeria’s inflation challenges.
A statement issued on Tuesday by the Chief Executive Officer of the CPPE, Muda Yusuf, said the decision by the MPC to hold the Monetary Policy Rate (MPR) at 26.5 per cent demonstrated “policy maturity, strategic restraint and confidence in the direction of macroeconomic management.”
During its 305th meeting on May 19-20, the MPC had retained the MPR at 26.5 per cent, while also maintaining the asymmetric corridor around the benchmark rate. The committee equally retained the Cash Reserve Ratio (CRR) at 15 per cent for merchant banks, 45 per cent for deposit money banks and 75 per cent for non-TSA deposits.
According to Yusuf, the current inflationary pressures confronting the Nigerian economy are largely structural and externally induced, rather than driven by excessive domestic demand.
“The intensifying geopolitical tensions involving Iran, Israel and the United States have triggered fresh volatility in the global energy market, pushing up crude oil prices and transmitting severe cost pressures into domestic energy prices, transportation, logistics and manufacturing operations,” he said.
He argued that relying solely on aggressive monetary tightening to address inflation would be counterproductive.
“Monetary policy is a powerful stabilisation instrument, but it cannot repair supply chains, resolve geopolitical conflicts or eliminate structural bottlenecks in production and distribution,” Yusuf stated.
“Attempting to force down structural inflation solely through aggressive monetary tightening would amount to applying a monetary solution to a structural problem.”
The CPPE warned that excessive tightening could “suffocate productivity, weaken industrial recovery, constrain investment appetite and undermine employment generation.”
“Economies do not grow on the strength of high interest rates; they grow on the strength of productivity, enterprise, investment confidence and policy coherence,” the statement added.
The economic advocacy group also praised the Central Bank for what it described as disciplined monetary management and the relative stability recently recorded in the foreign exchange market.
“Exchange rate stability has become one of the most important anchors of macroeconomic confidence in the economy,” Yusuf noted.
“A stable currency environment improves investor sentiment, moderates imported inflation, enhances planning predictability and reduces speculative distortions within the market.”
He said the recent policy direction of the apex bank reflected “a transition from crisis management to confidence management,” which he described as crucial for rebuilding investor trust and restoring macroeconomic credibility.
The CPPE further applauded the federal government’s renewed commitment to fiscal consolidation and improved revenue performance, stressing that sustainable macroeconomic stability depends heavily on fiscal discipline.
On the ongoing banking sector recapitalisation exercise, the group commended the Central Bank for ensuring a smooth and non-disruptive implementation process.
“The exercise has not triggered systemic anxiety, depositor panic, bank failures or significant erosion of shareholder confidence,” Yusuf said.
“This demonstrates regulatory maturity, improved supervisory capacity and careful management of transition risks by the Central Bank.”
He, however, urged the apex bank to sustain clear communication and continuous reassurance for banks still facing recapitalisation-related transition issues in order to preserve depositor confidence and overall financial system stability.
“Confidence remains the oxygen of the financial system,” he added.
The CPPE maintained that the outcome of the 305th MPC meeting reflected “a balanced and intelligent policy calibration” aimed at supporting investment, productivity, industrialisation and sustainable job creation, beyond merely reducing inflation figures.