Nigeria's reform gains risk stalling as high rates choke growth - CPPE

The Centre for the Promotion of Private Enterprise (CPPE) has warned that Nigeria’s hard-won macroeconomic stability could be undermined if policymakers continue to rely heavily on high interest rates, arguing that the next phase of reforms must focus on growth, job creation and improving living standards.

In its response to the International Monetary Fund’s (IMF) 2026 Article IV Consultation Report on Nigeria, the private sector advocacy group welcomed the Fund’s positive assessment of recent economic reforms but said greater policy balance is needed to ensure that stabilisation translates into tangible welfare gains for citizens.

The IMF had commended Nigeria’s reforms for helping restore macroeconomic stability, improve foreign exchange market conditions and strengthen investor confidence.

CPPE said the Fund’s assessment aligns with the position it has consistently advanced alongside many private sector stakeholders.

According to the group, the reforms have contributed to exchange rate stability, improved external sector balances, stronger foreign reserves, increased capital inflows and improved performance of many listed companies.

“These gains are significant. After years of macroeconomic distortions, the economy is gradually moving from a regime of instability to one of greater predictability,” the group said.

However, CPPE noted that despite the progress, poverty and food insecurity remain major concerns, echoing observations made by the IMF.

The group stressed that economic reforms should ultimately be measured by their impact on citizens’ welfare rather than improvements in macroeconomic indicators alone.

“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,” it said.

CPPE argued that economic management should now shift toward converting macroeconomic gains into broader prosperity.

The group expressed concern over what it described as the continued emphasis on monetary tightening, warning that excessively high interest rates are becoming a constraint on investment, business expansion and employment generation.

While acknowledging that the current monetary policy stance has helped moderate inflation and stabilise the exchange rate, CPPE said there is a risk that the costs of maintaining high rates could begin to outweigh the benefits.

“The cost of credit in Nigeria has reached levels that are becoming increasingly prohibitive for productive investment,” the group said.

According to CPPE, lending rates remain among the highest globally, making it difficult for businesses to expand operations, invest in new projects and create jobs.

The group also warned that elevated yields on government securities are encouraging banks and investors to channel funds into treasury bills and bonds rather than productive sectors of the economy.

“As a consequence, capital is gravitating towards financial assets rather than productive assets,” it said.

CPPE maintained that sustainable economic development cannot be achieved when financial capital earns higher returns from government securities than from supporting enterprise, innovation and industrialisation.

The group also disagreed with what it described as the IMF’s insufficient appreciation of the role of development finance in Nigeria’s economic transformation.

According to CPPE, strategic sectors such as agriculture, manufacturing, housing and infrastructure require long-term financing that conventional commercial lending often cannot provide efficiently.

It argued that development finance should not be viewed as a market distortion but as a necessary response to structural financing gaps and market failures.

“A purely market-driven financing model cannot adequately address Nigeria’s structural financing gaps,” the group said.

CPPE further highlighted the fiscal implications of prolonged monetary tightening, noting that high interest rates have significantly increased the cost of domestic borrowing and debt servicing.

The group warned that rising debt-service obligations are reducing fiscal space and limiting resources available for infrastructure, healthcare, education and other development priorities.

It welcomed recent indications by the Minister of Finance that the federal government plans to refinance portions of its debt portfolio to reduce financing costs.

The group also shared the IMF’s concerns about Nigeria’s growing reliance on foreign portfolio investments, warning that such inflows are highly sensitive to changes in global market conditions.

According to CPPE, sustainable external sector resilience should be anchored on stronger exports, increased productivity, higher foreign direct investment and a more competitive domestic economy rather than short-term capital inflows.

“Hot money can stabilise an economy temporarily; productive investment is what transforms it permanently,” the group said.

On social protection, CPPE questioned the continued reliance on conditional cash transfers as a primary poverty alleviation strategy.

The group argued that greater investment in agriculture, transportation infrastructure, healthcare, education and rural development would provide more sustainable solutions to poverty and high living costs.

It maintained that reducing the cost of living and expanding economic opportunities would have a more lasting impact on poverty reduction than direct cash transfers.

CPPE also faulted the IMF report for not giving sufficient attention to the role of state governments in driving economic reforms and development outcomes.

According to the group, improvements in federation revenue allocations have significantly increased the fiscal capacity of sub-national governments, making their spending priorities increasingly important to the success of national reforms.

Many of the country’s key development challenges, including food production, rural infrastructure, basic education and primary healthcare, fall largely within the responsibilities of state governments, it noted.

“Economic transformation in a federation cannot be driven from the centre alone,” CPPE said.

The group concluded that while macroeconomic stability has helped rescue the economy from crisis, the next phase of reforms should focus on ensuring that the benefits are widely shared through higher incomes, lower living costs and stronger economic opportunities.

“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,” it said.

Hope Moses-Ashike

Hope Moses-Ashike is an Associate Editor, Banking and Finance, with more than a decade of experience reporting on Nigeria’s financial system and broader economy. She closely tracks market movements, monetary policy decisions, company disclosures, regulatory actions, economic indicators, and global developments, and interprets what they mean for businesses, investors, policymakers, and households. Her reporting helps readers understand complex issues such as inflation trends, foreign exchange market dynamics, interest rate decisions, bank performance, and investment risks. She also covers major international events and periodically travels to Washington, D.C., to report on the World Bank/IMF Spring and Annual Meetings. Her dedication to financial journalism has earned her multiple recognitions and invitations to high-level professional development programmes. She is an alumna of the International Visitors Leadership Programme (IVLP) in the United States and holds an Advanced Financial Journalism Certificate from the Press Association Training in London, UK. Her other notable achievements include completing the Lagos Business School CMC Programme, the Bloomberg Media Africa Initiative Programme, and a Master Class in Journalism at Rhodes University in South Africa.