CPPE warns against prolonged tight monetary policy

By Abubakar Yunusa

The Centre for the Promotion of Private Enterprise has cautioned against prolonged monetary tightening and excessive reliance on foreign portfolio investments, warning that both could threaten Nigeria’s long-term economic growth despite recent gains in macroeconomic stability.
The concern was raised in a statement issued on Sunday by the Chief Executive Officer of CPPE, Dr Muda Yusuf, while reacting to the International Monetary Fund’s latest Article IV Consultation Report on Nigeria.
The organisation acknowledged the progress recorded in stabilising the economy and rebuilding investor confidence but stressed that the focus must now shift towards ensuring that economic gains translate into investments, job creation and improved living standards for Nigerians.
According to the CPPE, the IMF’s assessment accurately reflects improvements in macroeconomic stability. However, it argued that policymakers must strike a better balance between economic stability and growth.
The group expressed reservations over the IMF’s continued endorsement of tight monetary conditions, noting that the prevailing interest rate regime is becoming increasingly restrictive for businesses and productive investments.
It stated that foreign portfolio investments, commonly referred to as “hot money”, are increasingly being attracted to financial assets rather than sectors that can drive real economic growth.
“Capital in the form of Foreign Portfolio Investments is gravitating towards financial assets rather than productive assets,” the organisation said.
It added, “Hot money can stabilise 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.”
CPPE further noted that lending rates in Nigeria remain among the highest in the world, making it difficult for businesses to expand operations, increase productive capacity and generate employment opportunities.
While acknowledging that monetary tightening has contributed to moderating inflation and stabilising the foreign exchange market, the organisation warned that the economic costs of the policy could eventually outweigh its benefits if sustained for too long.
The group urged economic managers to adopt policies that would encourage productive investments and support inclusive growth, warning that macroeconomic stability alone would not be sufficient to deliver broad-based prosperity for Nigerians.