CPPE warns against prolonged monetary tightening, rising reliance on foreign portfolio inflows

The Centre for the Promotion of Private Enterprise (CPPE) has warned against prolonged monetary tightening and Nigeria’s growing dependence on foreign portfolio inflows, saying both could undermine long-term economic growth despite recent improvements in macroeconomic stability.

The position was contained in a statement issued on Sunday by the Chief Executive Officer of CPPE, Dr. Muda Yusuf, in reaction to the International Monetary Fund’s (IMF) latest Article IV Consultation Report on Nigeria.

While acknowledging the progress made in stabilising the economy and restoring investor confidence, the organisation said policymakers must ensure that macroeconomic gains translate into investment growth, job creation and improved living standards for Nigerians.

What they are saying:

CPPE said the IMF’s assessment correctly reflects the progress made in restoring macroeconomic stability but argued that greater policy balance is needed to ensure sustainable economic growth.

The organisation expressed concern over the IMF’s continued support for tight monetary conditions, noting that the current interest-rate environment is becoming increasingly restrictive for businesses and productive investment.

• “Capital in the form of Foreign Portfolio Investments (FPI also known as hot money) is gravitating towards financial assets rather than productive assets.”
• “Hot money can stabilize an economy temporarily; productive investment is what transforms it permanently.”
• “The challenge before policymakers is no longer merely one of economic stabilisation; it is increasingly one of inclusive prosperity.”

According to the organisation, lending rates in Nigeria remain among the highest globally, making it difficult for businesses to expand operations, invest in productive capacity and create jobs.

It added that while monetary tightening has helped moderate inflation and stabilise the foreign exchange market, there is a risk that the economic costs of the policy may begin to outweigh its benefits.

More insights:

CPPE also warned that prolonged high interest rates are increasing the cost of domestic borrowing and worsening debt-service obligations.

The organisation noted that a growing share of government revenue is being consumed by debt servicing, thereby limiting fiscal space for investments in infrastructure, healthcare, education and other growth-enhancing sectors.

• CPPE welcomed recent indications by the Federal Government that it plans to refinance portions of its debt portfolio to reduce borrowing costs and improve fiscal sustainability.
• The organisation defended the continued use of development finance interventions, arguing that strategic sectors such as agriculture, manufacturing, housing and infrastructure cannot rely solely on commercial lending channels.
• It stated that Nigeria’s structural financing gaps make development finance a necessity rather than a policy distortion.
• CPPE noted that commercial credit remains expensive, short-term and risk-averse, limiting access to the long-term capital required for economic transformation.
• The group maintained that targeted financing interventions remain critical for supporting productivity, industrialisation and job creation.
• It also acknowledged significant progress in restoring macroeconomic stability, pointing to improved foreign reserves, recovering capital inflows, stronger corporate earnings and increased policy credibility as evidence that recent reforms are yielding positive results.
• According to CPPE, the economy is gradually transitioning from a period of macroeconomic distortions and instability to a more predictable operating environment.
• However, it stressed that economic reforms should ultimately be measured by their impact on citizens’ welfare rather than improvements in macroeconomic indicators alone.

The organisation agreed with the IMF’s concerns over persistent poverty and food insecurity, noting that exchange-rate stability, reserve accumulation and fiscal consolidation would mean little if they do not translate into lower food prices, higher incomes, better jobs and improved living standards.

What you should know:

Nigeria’s Monetary Policy Rate (MPR) has experienced an unprecedented tightening cycle since 2023 under the leadership of Central Bank Governor Olayemi Cardoso, before entering a gradual easing phase in late 2025 and 2026.

• President Bola Tinubu appointed Cardoso as CBN governor on inauguration in May 2023, and the government set out to implement series of monetary and fiscal policies reforms, including floating the local currency and initiating tight monetary policy to combat inflation and exchange rate volatility.
• The most dramatic phase of tightening occurred in 2024 when the CBN raised the benchmark rate six consecutive times, taking it from 18.75% to 27.50% in November 2024.
• By 2025, the CBN shifted to a pause, retaining the MPR at 27.50% in several meetings of the Monetary Policy Committee (MPC) before the easing cycle began in September 2025.
• The MPR was reduced to 27.00% in September 2025, followed by another cut in February 2026 to 26.50%, the lowest level since May 2024.
• CPPE has consistently warned against excessive monetary tightening and has repeatedly urged the CBN to avoid further interest-rate hikes because of their impact on investment, enterprise growth and job creation.
• The IMF’s latest Article IV report acknowledged improvements in exchange-rate stability, external reserves and investor confidence.

The CPPE’s latest intervention highlights the growing debate over how Nigeria should balance macroeconomic stability with economic growth, inclusion and long-term transformation. For CPPE, the next phase of the country’s reform journey should focus on converting recent economic gains into jobs, lower living costs and broad-based prosperity.