The Centre for the Promotion of Private Enterprise (CPPE) today released a comprehensive review of the first two years of the Central Bank of Nigeria (CBN) under Governor Yemi Cardoso. The review acknowledges significant strides in restoring market transparency, institutional credibility, and financial system stability, while also sounding a note of caution on the restrictive effects of current monetary policies on economic growth.
The CPPE highlights the unification of the foreign exchange (FX) market as a landmark achievement, noting its role in eliminating arbitrage, improving market liquidity, and attracting higher capital inflows. The review also commends the CBN for strengthening corporate governance, curtailing excessive monetary financing, and introducing recapitalization measures that have bolstered the banking sector’s resilience. These reforms, the CPPE states, have been crucial in repositioning the CBN as a more professional and independent institution.
However, the CPPE’s analysis points to emerging concerns regarding the aggressive monetary tightening stance. With the Monetary Policy Rate (MPR) at 27.5% and the Cash Reserve Ratio (CRR) at 50%, the review notes that the cost of funds has become prohibitively high, suppressing private sector borrowing. This has had a particularly severe impact on key sectors, including manufacturing, agriculture, and small and medium-sized enterprises (SMEs). The CPPE warns of a growing “crowding-out effect,” where private investment is displaced by high-yield government instruments.
“Governor Cardoso’s leadership has brought much-needed transparency and stability to our financial system,” said Dr. Muda Yusuf, Director-General of the CPPE. “However, our review shows that a purely market-based approach has not been sufficient to address the structural financing gaps facing our economy. It is now imperative for the CBN to adopt a more balanced policy that complements price stability with measures to support sustainable growth.”
The CPPE’s policy recommendations include a call for the CBN to gradually ease the CRR and MPR as inflation moderates. It also urges the development of targeted credit guarantee schemes and concessionary financing programs for SMEs and critical sectors that are currently starved of long-term patient capital. These steps, the CPPE believes, are critical to ensuring the financial sector’s full potential as a driver of inclusive economic development.
