Dare Babalola
The Centre for the Promotion of Private Enterprise (CPPE) has urged the Monetary Policy Committee (MPC) of the Central Bank of Nigeria to avoid excessive monetary tightening at its forthcoming 305th meeting.
He warned that higher interest rates could weaken economic growth, reduce investments and worsen pressures on businesses.
In a statement issued on Saturday, the Chief Executive Officer of CPPE, Dr. Muda Yusuf, said expectations ahead of the MPC meeting must be viewed against the backdrop of mounting domestic economic challenges, geopolitical tensions and rising liquidity risks within the Nigerian economy.
According to the CPPE, the escalating tensions involving the United States, Israel and Iran have already triggered volatility in the global energy market, resulting in higher crude oil prices and increased domestic energy costs.
The organisation noted that the development could further worsen inflationary pressures by increasing production, transportation and logistics costs across sectors of the economy.
“Of immediate significance are the escalating geopolitical tensions involving the United States, Israel and Iran, which have triggered renewed volatility in the global energy market,” the statement said.
“The resulting surge in crude oil prices is already transmitting into higher domestic energy costs, with significant implications for inflationary pressures, production costs, transportation, logistics and overall business operating conditions within the economy,” it added.
The CPPE also expressed concern over what it described as early signs of election-related liquidity injections ahead of the 2027 general elections.
It identified rising political spending, increased election-related expenditures and improved Federation Account Allocation Committee disbursements to states as potential threats to inflation management and liquidity control.
According to the organisation, the recent engagement between the Central Bank of Nigeria and state governments on inflationary consequences of elevated fiscal injections reflects growing official concerns over excess liquidity in the economy.
The CPPE said the MPC may be inclined towards retaining the current tight monetary stance or adopting a cautious tightening bias to manage inflation expectations and sustain investor confidence.
However, it warned that additional tightening could significantly undermine private sector growth and economic recovery.
“Further tightening of monetary conditions could significantly weaken credit expansion, dampen investment appetite and undermine the fragile recovery momentum within the real sector,” the statement noted.
The organisation maintained that Nigeria’s inflation challenges are largely supply-side and cost-push driven, arguing that conventional monetary tightening may not effectively address the root causes of rising prices.
According to the CPPE, major inflation drivers in the country remain energy costs, transportation expenses, logistics bottlenecks and structural inefficiencies in the production environment.
“Monetary tightening is generally more effective in addressing demand-pull inflation arising from heightened aggregate demand and liquidity expansion. Its effectiveness in addressing supply-side inflation shocks is considerably more limited,” Yusuf stated.
The group further warned that higher interest rates could increase borrowing costs, weaken manufacturing competitiveness, suppress small and medium-scale enterprises and slow investment expansion at a critical period for economic recovery.
The CPPE therefore called for a balanced and pragmatic monetary policy framework capable of preserving macroeconomic stability while supporting productive investments and job creation.
It stressed that sustainable disinflation in Nigeria would depend more on improvements in productivity, energy security, logistics efficiency, exchange rate stability and domestic refining capacity than aggressive monetary tightening.
“In the final analysis, while prevailing inflationary risks may justify a cautious policy posture by the MPC, the CPPE strongly urges the monetary authorities to avoid excessive reliance on monetary policy orthodoxy in managing what is fundamentally a structurally-driven inflation environment,” the statement added.
