By Seun Ibiyemi
The Centre for the Promotion of Private Enterprise (CPPE) has urged the Monetary Policy Committee (MPC) of the Central Bank of Nigeria to strike a careful balance between inflation control and economic growth as it prepares for its 305th meeting, warning that further monetary tightening could deepen Nigeria’s fragile recovery.
In an extensive policy position ahead of the meeting, the Chief Executive Officer of the CPPE, Dr. Muda Yusuf said expectations around the MPC’s decision must be viewed within the context of rising global and domestic pressures, including geopolitical tensions, fiscal liquidity risks, and structural inflation drivers affecting the Nigerian economy.
He noted that escalating tensions involving the United States, Israel, and Iran have triggered volatility in global oil markets, pushing up crude prices.
According to CPPE, this development is already feeding into higher domestic energy costs, with ripple effects on transportation, logistics, production costs and overall business operations.
He also warned that early signs of election-related spending ahead of the 2027 political cycle, combined with increased fiscal injections through Federation Account Allocation Committee (FAAC) allocations, are adding to liquidity pressures in the economy.
Dr Yusuf further referenced recent engagements between the Central Bank of Nigeria and state governments, which highlighted concerns over excess liquidity and its inflationary impact, suggesting that the MPC may adopt a cautious tightening bias or maintain its current restrictive stance.
However, the private sector advocacy group warned that such a direction could come at a significant cost to growth, investment and job creation.
He argued that Nigeria’s economy remains structurally weak, with persistent infrastructure deficits, high energy costs, limited productive capacity and rising unemployment.
In this context, additional tightening, he said, could further constrain credit expansion, weaken manufacturing competitiveness and increase loan defaults across sectors.
According to him, elevated interest rates also risk worsening debt servicing pressures for both businesses and government, thereby slowing down the already fragile recovery momentum in the real sector.
He stressed that Nigeria’s inflationary challenge is largely driven by supply-side and cost-push factors rather than excess demand. It identified energy costs, transportation bottlenecks, logistics inefficiencies and structural production constraints as the major drivers of rising prices.
As a result, it argued that monetary tightening alone is insufficient to address inflation effectively, since such tools are more suited to demand-driven inflationary environments.
He cautioned that aggressive tightening under current conditions could suppress SME growth, discourage investment, and reduce household consumption at a time when the economy needs expansionary support for productivity and employment generation.
Instead, it called for a more “nuanced, pragmatic and context-sensitive” monetary policy framework that balances price stability with growth imperatives, particularly in a developing economy with significant structural constraints.
He maintained that sustainable disinflation in Nigeria would depend more on reforms that improve energy security, enhance logistics efficiency, boost domestic refining capacity, stabilise the exchange rate and strengthen overall productivity.
In its conclusion, he urged the MPC to avoid over-reliance on conventional monetary orthodoxy, stressing that policy choices must reflect Nigeria’s unique economic realities rather than advanced economy models that may not fully apply.
