The Centre for the Promotion of Private Enterprise (CPPE) has urged the Central Bank of Nigeria (CBN) to avoid aggressive monetary tightening as policymakers prepare for the forthcoming 305th meeting of the Monetary Policy Committee (MPC), warning that excessive rate hikes could weaken Nigeria’s fragile economic recovery.
In a statement issued on Saturday, the Chief Executive Officer of CPPE, Muda Yusuf, said expectations ahead of the MPC meeting should be viewed against the backdrop of worsening global geopolitical tensions, rising energy prices and growing domestic liquidity pressures.
According to him, the escalating tensions involving the United States, Israel and Iran have already triggered renewed volatility in the global oil market, leading to higher crude oil prices with direct implications for Nigeria’s inflation outlook.
The Apex bank, at the last MPC meeting, decided to reduce the Monetary Policy Rate (MPR) by 50 basis points to 26.5 per cent. Other key decisions included maintaining the Cash Reserve Ratio (CRR) at 45 per cent for commercial banks and 16 pern cent for merchant banks, while the Liquidity Ratio was kept unchanged at 30 per cent.
While Yusuf opposed a further hike, he noted that the surge in energy costs could further increase transportation expenses, logistics costs and general business operating expenses across the economy.
At the domestic level, Yusuf said early signs of election-related liquidity injections ahead of the 2027 general elections are becoming increasingly visible through rising political spending, election-related expenditures and improved Federation Account Allocation Committee disbursements to subnational governments.
He added that the recent engagement between the CBN and state governments on the inflationary implications of elevated fiscal injections reflects growing official concerns about excess liquidity within the economy.
Against this backdrop, the CPPE said the MPC may be inclined to maintain a tight monetary stance or adopt a cautious tightening bias in order to contain inflationary pressures and sustain investor confidence.
However, the organisation warned that any additional monetary tightening could significantly hurt economic growth, private sector investment, industrial productivity and job creation.
“The Nigerian economy remains fragile and structurally constrained. Further tightening of monetary conditions could significantly weaken credit expansion, dampen investment appetite and undermine the fragile recovery momentum within the real sector,” Yusuf stated.
The CPPE argued that monetary policy management in developing economies such as Nigeria requires a more pragmatic and context-sensitive approach that balances price stability objectives with economic growth considerations.
According to the group, the current inflationary pressures are largely supply-side and cost-push in nature, driven mainly by rising energy costs, transportation expenses, logistics bottlenecks and structural inefficiencies.
It stressed that monetary tightening is generally more effective in addressing demand-pull inflation rather than inflation caused by supply disruptions and structural weaknesses.
The economic policy group warned that further tightening under prevailing conditions could impose severe costs on the productive sector without delivering substantial gains in inflation moderation.
It noted that higher interest rates would increase the cost of capital, weaken manufacturing competitiveness, suppress SME growth, constrain household consumption and slow investment expansion at a time when the economy urgently requires productivity-enhancing investments and employment generation.
The CPPE therefore advocated a balanced and carefully calibrated monetary policy framework capable of preserving macroeconomic stability while supporting productive investments and strengthening supply-side capacity within the economy.
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