The Centre for the Promotion of Private Enterprise (CPPE) has cautioned the Central Bank of Nigeria (CBN) against further monetary tightening, warning that additional interest rate hikes could be counterproductive to the nation’s fragile economic recovery.
In its Q1 2026 Economic Review and Q2 Outlook, the CPPE acknowledged that while the MPC reduced the policy rate to 26.5% in February, there is a lingering risk that the apex bank may be inclined toward further tightening to combat prevailing geopolitical and inflationary pressures.
The think tank argued that such a move would be ill-advised given the fragility of current growth dynamics.
The CPPE highlighted a critical disconnect in current policy, noting that Nigeria’s inflationary episode is largely cost-push in nature.
The report identifies the primary drivers of rising prices as elevated energy costs and fuel prices, exchange rate pass-through effects and structural inefficiencies and insecurity in agricultural zones.
Because inflation is not being driven by excess aggregate demand, the CPPE maintains that further monetary tightening would have limited effectiveness in addressing these underlying drivers.
The warning comes as the economy faces a pronounced risk of stagflation, a dangerous combination of elevated inflation and weakened growth.
The ongoing Middle East conflict has already pushed global crude oil prices above the $100 per barrel threshold, which threatens to reverse recent disinflation gains by driving up domestic logistics and production expenses.
Dr. Muda Yusuf, CEO of the CPPE, noted that while macroeconomic stability showed signs of consolidation in Q1 with inflation moderating to 15.06% by February and external reserves exceeding $50 billion these gains remain vulnerable.
He emphasized that for the real sector, lending rates remain prohibitively high, significantly constraining access to credit for Small and Medium Enterprises (SMEs).
Looking ahead, the CPPE expects monetary policy to remain cautious and strongly data-driven, with limited room for aggressive rate cuts in the near term