Think tank warns aggressive monetary tightening could deepen pressure on businesses, weaken investment, and slow Nigeria’s fragile economic recovery…..
The Centre for the Promotion of Private Enterprise has cautioned the Central Bank of Nigeria against pursuing another round of aggressive monetary tightening ahead of the 305th Monetary Policy Committee meeting scheduled to hold this week.
In a statement issued on May 17, 2026, and signed by its Chief Executive Officer, Muda Yusuf, the economic policy group said the upcoming MPC meeting is taking place at a delicate moment for both the global and domestic economy.
According to the organisation, rising geopolitical tensions involving the United States, Israel, and Iran have already begun to unsettle global energy markets, triggering renewed volatility in crude oil prices and raising fresh concerns for inflation across emerging economies like Nigeria.
CPPE warned that higher crude prices are expected to filter into the domestic economy through increased energy costs, transportation expenses, logistics charges, and production costs, factors that could further worsen inflationary pressure on businesses and households.
The group also expressed concern over rising fiscal liquidity linked to preparations for the 2027 general elections. It noted that increased political spending, alongside growing allocations from the Federation Account Allocation Committee to state governments, may inject excess liquidity into the economy and complicate inflation management efforts.
According to CPPE, recent engagements between the apex bank and state governments on inflation and fiscal injections suggest authorities are already worried about mounting liquidity pressures within the financial system.
The think tank said these conditions could push the Monetary Policy Committee to maintain its current hawkish stance or even signal another tightening move in a bid to sustain investor confidence and contain inflation expectations.
However, the organisation warned that further increases in interest rates could come at a heavy cost to the productive sector.
It argued that Nigeria’s economy remains structurally weak and vulnerable, stressing that higher borrowing costs could discourage private sector investment, slow industrial expansion, weaken credit growth, and threaten job creation.
CPPE further warned that excessive tightening may increase loan default risks for businesses already struggling with elevated operating costs, while also worsening debt servicing burdens for both the private sector and government.
The group maintained that Nigeria’s inflation challenge is largely driven by structural and supply-side problems rather than excessive consumer demand.
According to the organisation, rising prices are being fuelled primarily by energy costs, exchange rate instability, transportation challenges, weak infrastructure, and supply chain inefficiencies, issues that conventional monetary tightening alone may not effectively resolve.
CPPE argued that while interest rate hikes can help curb demand-driven inflation, they are less effective in addressing cost-push inflation caused by structural bottlenecks.
The organisation therefore urged policymakers to adopt a more balanced and carefully calibrated approach that protects macroeconomic stability without undermining investment and private sector growth.
It added that long-term inflation moderation in Nigeria would depend more on improvements in energy security, domestic refining capacity, infrastructure, productivity, logistics efficiency, and exchange rate stability than on sustained monetary tightening alone.
