- Cautions That High Interest Rates Increase Loan Defaults, Weaken Businesses, Worsen Government Debt Pressures.
The Centre for the Promotion of Private Enterprise (CPPE) has sounded a strong warning to the Central Bank of Nigeria and members of the Monetary Policy Committee (MPC), cautioning that further monetary tightening could choke economic growth, cripple businesses and worsen unemployment across the country.
This warning is coming ahead of the 305th MPC meeting of the MPC scheduled for Monday and Tuesday.
The economic think tank said Nigeria is walking a dangerous economic tightrope as inflationary pressures intensify amid worsening global tensions and mounting political spending linked to the 2027 elections.
In a statement issued on Sunday, CPPE Chief Executive Officer, Muda Yusuf, warned that the country’s fragile economy may not survive another round of aggressive interest rate hikes.
“Further tightening of monetary conditions could significantly weaken credit expansion, dampen investment appetite and undermine the fragile recovery momentum within the real sector,” Yusuf declared.
The group pointed to the escalating geopolitical conflict involving the United States, Israel and Iran, saying the resulting spike in global crude oil prices is already fueling higher domestic energy costs and worsening inflationary pressures in Nigeria.
According to the CPPE, rising transportation costs, logistics challenges and soaring production expenses are putting businesses under severe strain.
The economic policy group also raised alarm over what it described as early signs of “election-related liquidity injections” ahead of the 2027 general elections.
It warned that increasing political spending by aspirants and political parties, alongside improved FAAC allocations to states, could flood the economy with excess liquidity and further destabilise prices.
“The recent engagement by the CBN with state governments on the inflationary consequences of elevated fiscal injections further underscores official concerns regarding excess liquidity conditions in the economy,” the statement noted.
While acknowledging that the MPC may be tempted to maintain its hawkish stance to tame inflation and reassure investors, the CPPE insisted that excessive tightening would come at a devastating cost to the productive sector.
“Excessively elevated interest rates heighten the risks of loan defaults, weaken the financial sustainability of businesses and exacerbate sovereign debt service pressures,” Yusuf warned.
The organisation stressed that Nigeria’s inflation crisis is largely driven by structural and supply-side problems rather than excessive consumer demand, arguing that conventional monetary tightening may do little to address the real causes of rising prices.
“The major inflation drivers remain energy costs, transportation expenses, logistics bottlenecks and structural inefficiencies within the production environment,” the CPPE said.
It argued that raising interest rates further would only make borrowing more expensive for manufacturers and small businesses, suppress investments and weaken household purchasing power at a time the country desperately needs job creation and industrial expansion.
The CPPE therefore urged the MPC to adopt what it called a “carefully calibrated and balanced monetary policy stance” capable of preserving macroeconomic stability without suffocating economic recovery.
“Sustainable disinflation in Nigeria will depend far more on improvements in productivity, energy security, logistics efficiency, exchange rate stability, domestic petroleum refining capacity and overall supply-side reforms than on aggressive monetary tightening,” Yusuf stated.
The intervention comes amid growing anxiety in the business community over the impact of high interest rates on investment, manufacturing and consumer spending as Nigeria battles stubborn inflation and slowing economic growth.
