The Centre for the Promotion of Private Enterprise (CPPE) has urged the Monetary Policy Committee (MPC) of the Central Bank of Nigeria (CBN) to adopt a balanced and pragmatic approach at its forthcoming 305th meeting, warning against excessive monetary tightening that could weaken economic growth, private sector investment, and job creation.
In a statement ahead of the MPC meeting, CPPE said expectations should be viewed within the context of evolving domestic macroeconomic realities, heightened geopolitical tensions, and emerging fiscal liquidity risks confronting the Nigerian economy.
The economic policy advocacy group noted that escalating tensions involving the United States, Israel, and Iran have triggered renewed volatility in the global energy market, leading to a surge in crude oil prices with direct implications for Nigeria’s inflation outlook.
According to CPPE, rising global oil prices are already translating into higher domestic energy costs, worsening inflationary pressures, increasing production and transportation costs, and creating more difficult operating conditions for businesses across the country.
The organisation also pointed to growing domestic liquidity concerns linked to early election-related spending ahead of the 2027 general elections. It explained that rising political expenditures, increased campaign-related spending, and improved Federation Account Allocation Committee (FAAC) disbursements to states could heighten inflationary risks within the economy.
CPPE noted that the recent engagement between the Central Bank of Nigeria and state governments on the inflationary implications of elevated fiscal injections reflects mounting concerns about excess liquidity conditions.
Against this backdrop, the group stated that the MPC may be inclined towards maintaining a tight monetary stance or adopting a cautious tightening bias to contain inflation expectations, sustain investor confidence, and reinforce policy credibility.
However, CPPE expressed strong reservations about the consequences of further monetary tightening on the real economy.
“The Nigerian economy remains fragile and structurally constrained. Additional tightening of monetary conditions could significantly weaken credit expansion, dampen investment appetite, and undermine the fragile recovery momentum within the productive sector,” the statement said.
The organisation warned that persistently high interest rates could increase the risk of loan defaults, weaken business sustainability, discourage manufacturing activities, and worsen sovereign debt service obligations.
CPPE argued that monetary policy management in developing economies such as Nigeria requires a more nuanced and context-sensitive approach than what typically applies in advanced economies.
According to the group, Nigeria’s structural realities — including infrastructure deficits, weak productive capacity, elevated unemployment, high energy costs, and major financing gaps — demand a policy framework that balances inflation control with growth-supportive measures.
The organisation further stressed that Nigeria’s inflation challenge remains largely supply-side and cost-push in nature, driven mainly by rising energy prices, transportation costs, logistics bottlenecks, and structural inefficiencies in the production environment.
It explained that monetary tightening is generally more effective in addressing demand-driven inflation rather than inflation caused by supply constraints and rising production costs.
CPPE warned that additional tightening under prevailing conditions could impose disproportionate costs on businesses without delivering significant gains in inflation moderation.
The group stated that higher interest rates would raise 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.
CPPE therefore advocated a carefully calibrated monetary policy stance that preserves macroeconomic stability while avoiding measures capable of undermining economic recovery and private sector resilience.
The organisation maintained that policy priorities should focus on sustaining investor confidence, supporting productive investments, stimulating output growth, and strengthening the economy’s supply-side capacity while maintaining vigilance on inflation management.
In conclusion, CPPE urged the MPC to avoid excessive reliance on conventional monetary policy tightening in addressing what it described as a structurally-driven inflation environment.
The group emphasized that sustainable disinflation in Nigeria would depend more on improvements in productivity, energy security, logistics efficiency, exchange rate stability, domestic refining capacity, and broader supply-side reforms than on aggressive interest rate hikes.
