…Warns against prolonged high interest rates
By Seun Ibiyemi
The Centre for the Promotion of Private Enterprise (CPPE) has welcomed the positive assessment of Nigeria’s economic reforms contained in the latest International Monetary Fund (IMF) Article IV Consultation Report, describing the Fund’s findings as consistent with the position long held by stakeholders within the Nigerian private sector.
In a statement issued by the Chief Executive Officer of CPPE, Dr. Muda Yusuf, the organisation noted that recent economic reforms have contributed significantly to restoring macroeconomic stability, stabilising the foreign exchange market, improving external sector balances, strengthening investor confidence and enhancing policy credibility.
According to him, the moderation in exchange rate volatility, improvement in foreign reserves, recovery in capital inflows and stronger performance of many listed companies demonstrate the positive outcomes of the stabilisation measures implemented over the past three years.
He stated that after years of economic distortions, Nigeria is gradually transitioning from a period of instability to one characterised by greater predictability, creating a stronger foundation for investment, productivity and sustainable growth.
However, Dr. Yusuf stressed that macroeconomic stability alone is insufficient if it does not translate into tangible improvements in the lives of citizens.
While agreeing with the IMF’s concerns over persistent poverty and food insecurity, he argued that economic reforms should ultimately be judged by their impact on living standards, job creation and household welfare.
“Exchange rate stability, reserve accumulation and fiscal consolidation are important, but the true test of reform is whether they translate into lower food prices, better jobs, improved incomes and enhanced living standards,” he noted.
He called on policymakers to focus the next phase of economic management on converting macroeconomic gains into broad-based welfare improvements and inclusive prosperity.
He also expressed reservations about what it described as an overreliance on monetary tightening, warning that persistently high interest rates could undermine investment, enterprise growth and job creation.
While acknowledging that the current monetary policy stance has contributed to inflation moderation and exchange rate stability, he argued that excessively high lending rates are making productive investment increasingly difficult.
Yusuf noted that high yields on government securities have encouraged banks and investors to channel funds into treasury bills and bonds rather than financing productive sectors, thereby limiting economic expansion and industrial development.
He further defended the role of development finance interventions, arguing that sectors such as agriculture, manufacturing, housing and infrastructure require long-term capital that conventional commercial lending cannot adequately provide.
According to CPPE, development finance remains critical for addressing market failures and unlocking productivity, particularly in an economy where commercial credit is expensive, short-term and risk-averse.
He also raised concerns over the impact of prolonged monetary tightening on public finances, noting that elevated interest rates have increased domestic borrowing costs and expanded debt-service obligations.
He welcomed recent indications by the Federal Government to refinance portions of its debt portfolio in order to reduce financing costs, describing the move as a positive step towards improving fiscal sustainability.
On external sector management, he echoed IMF concerns regarding Nigeria’s growing dependence on foreign portfolio investments, warning that such inflows remain highly volatile and susceptible to changes in global market conditions.
He emphasised that sustainable economic resilience should be built on stronger exports, higher productivity, increased foreign direct investment and enhanced competitiveness rather than short-term capital inflows.
Addressing social protection policies, CPPE argued that conditional cash transfers should not remain the centrepiece of Nigeria’s poverty reduction strategy.
Instead, it advocated greater public investment in agriculture, transportation infrastructure, healthcare, education and rural development to reduce the cost of living and create long-term economic opportunities.
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He also faulted the IMF report for paying insufficient attention to the role of state governments in driving economic transformation.
He noted that with increased federation allocations, sub-national governments now control larger fiscal resources and have a crucial role to play in addressing food production, rural infrastructure, healthcare, education and security challenges.
CPPE concluded that while macroeconomic stability is essential for rescuing an economy from crisis, sustainable and inclusive prosperity remains the ultimate objective of reform efforts.
“Macroeconomic stability may rescue an economy from crisis, but shared prosperity is what secures public confidence in reform. That should be the defining objective of the next phase of Nigeria’s economic journey,” the statement said.
