CPPE cautions FG against prolonged monetary tightening

Nigeria’s pursuit of macroeconomic stability could come at a significant cost to investment, job creation and long-term economic growth if policymakers sustain tight monetary policies and continue to rely heavily on foreign portfolio inflows, the Centre for the Promotion of Private Enterprise (CPPE) has warned.

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

While acknowledging recent gains in restoring macroeconomic stability and investor confidence, the private sector advocacy group cautioned that the focus of economic management must now shift from stabilisation to inclusive growth and improved living standards.

“Capital in the form of Foreign Portfolio Investments (FPI also known as hot money) is gravitating towards financial assets rather than productive assets,” the organisation stated.

It added, “Hot money can stabilize an economy temporarily; productive investment is what transforms it permanently.”

According to CPPE, Nigeria’s current high-interest-rate environment is becoming increasingly restrictive for businesses, discouraging expansion, investment in productive capacity and job creation.

The organisation argued that although monetary tightening has helped moderate inflation and stabilise the foreign exchange market, there is growing concern that the economic costs of the policy may soon outweigh its benefits.

“The challenge before policymakers is no longer merely one of economic stabilisation; it is increasingly one of inclusive prosperity,” CPPE said.

The group further warned that prolonged high interest rates are raising the cost of domestic borrowing while worsening debt-service obligations for government.

It noted that a growing portion of public revenue is being spent on servicing debt, leaving less fiscal space for critical investments in infrastructure, healthcare, education and other sectors essential for economic growth.

CPPE, however, welcomed indications by the Federal Government that it intends to refinance parts of its debt portfolio in order to reduce borrowing costs and strengthen fiscal sustainability.

The organisation also defended the continued use of development finance interventions, insisting that sectors such as agriculture, manufacturing, housing and infrastructure cannot depend solely on commercial lending due to structural financing constraints.

According to CPPE, commercial credit remains expensive, short-term and risk-averse, limiting access to the long-term capital required for economic transformation.

While recognising improvements in foreign reserves, capital inflows, corporate earnings and policy credibility, the group stressed that economic reforms should ultimately be judged by their impact on citizens’ welfare.

It agreed with the IMF’s concerns over persistent poverty and food insecurity, warning that exchange-rate stability, reserve accumulation and fiscal consolidation would have limited value if they fail to translate into lower food prices, higher incomes, better jobs and improved living standards for Nigerians.

CPPE said the economy is gradually emerging from a period of distortions and instability, but urged policymakers to ensure that the gains from reform are converted into broad-based prosperity.

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