The Centre for The Promotion of Private Enterprise (CPPE) has warned against  further monetary tightening, ahead of the Monetary Policy Committee (MPC) meeting of the Central Bank of Nigeria (CBN), scheduled for Tuesday and Wednesday, May 19 and 20,  this week.

 

CPPE, in a statement signed by its Chief Executive Officer, Dr. Muda Yusuf, on Sunday, argued that the warning has become imperative since monetary tightening alone cannot resolve inflation, driven by energy costs, logistics inefficiencies, food supply disruptions and weak infrastructure conditions.

 

It also cautioned that additional monetary tightening could worsen financing costs for businesses, weaken investment and further constrain productivity growth.

 

The Centre identified early signs of election-related liquidity  injections, ahead of 2027, and substantially-improved Federation Account Allocation Committee (FAAC) disbursements to subnational governments, as some of the factors that constitute grave risks to liquidity management and inflation containment.

 

It therefore expressed the belief that, against this backdrop, the MPC may evaluate those developments through the prism of its price stability mandate and inflation management objectives.

“There is a strong possibility that the Committee may be inclined towards a cautious tightening bias or a prolonged retention of the current tight monetary stance in order to contain inflation expectations, reinforce policy credibility and sustain investor confidence,” it added.

 

The Centre,  however, warned that additional monetary tightening, at this time, would have serious implications for economic growth, private sector investment, industrial productivity and employment generation.

It argued that the nation’s economy remains fragile and structurally constrained, adding that further tightening of monetary conditions could significantly weaken credit expansion, dampen investment appetite and undermine the fragile recovery momentum within the real sector.

 

The Centre also expressed the belief that excessively elevated interest rates would also heighten the risks of loan defaults, weaken the financial sustainability of businesses and exacerbate sovereign debt service pressures.

 

It therefore called for a more nuanced, pragmatic and context-sensitive approach to Nigeria’s monetary policy management adding that the nation’s  structural realities, including infrastructure deficits, weak productive capacity, elevated unemployment, high energy costs and substantial financing gaps,  call for a monetary policy framework that carefully balances price stability objectives with growth-supportive imperatives.

 

“Further tightening under prevailing conditions therefore risks imposing disproportionate costs on the productive sector without necessarily delivering commensurate gains in inflation moderation. 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 job creation,” it added.