CPPE backs CBN’s move to hold policy rates

…says economies grow on productivity not high interest rates

The Centre for the Promotion of Private Enterprise (CPPE) has backed the Central Bank of Nigeria’s (CBN) decision to hold all key monetary policy parameters at the 305th meeting of the Monetary Policy Committee [MPC], stating that the decision reflects a pragmatic, measured and increasingly understanding of the inflation dynamics currently confronting the Nigerian economy.

The MPC had retained the Monetary Policy Rate [MPR] at 26.5 percent, maintained the asymmetric corridor around the MPR, retained the Cash Reserve Ratio [CRR] at 15 percent for merchant banks, 45 percent for deposit money banks and 75 percent for non-TSA deposits.

Muda Yusuf, Chief Executive Officer, CPPE, in a policy brief on Wednesday said that at time of heightened global uncertainty and mounting geopolitical tensions, the decision of the MPC sends a powerful signal of policy maturity, strategic restraint and confidence in the direction of macroeconomic management.

Yusuf explained that the current inflationary pressures are substantially structural and externally induced, adding that inflation at this time is being driven more by supply-side disruptions than by excess domestic demand.

The intensifying geopolitical tensions involving Iran, Israel and the United States, according to Yusuf have triggered fresh volatility in the global energy market, pushing up crude oil prices and transmitting severe cost pressures into domestic energy prices, transportation, logistics and manufacturing operations.

“Monetary policy is a powerful stabilisation instrument, but it cannot repair supply chains, resolve geopolitical conflicts or eliminate structural bottlenecks in production and distribution. Attempting to force down structural inflation solely through aggressive monetary tightening would amount to applying a monetary solution to a structural problem.

“The decision to hold rates therefore demonstrates a commendable recognition that excessive tightening at this stage could suffocate productivity, weaken industrial recovery, constrain investment appetite and undermine employment generation.

“Economies do not grow on the strength of high interest rates; they grow on the strength of productivity, enterprise, investment confidence and policy coherence. The CPPE particularly commends the Central Bank for the increasingly disciplined management of the monetary policy architecture and the relative stability achieved in the foreign exchange market over recent months,” he said.

Yusuf further noted that exchange rate stability has become one of the most important anchors of macroeconomic confidence in the economy, emphasizing that a stable currency environment improves investor sentiment, moderates imported inflation, enhances planning predictability and reduces speculative distortions within the market.

For him, the recent policy direction of the Central Bank reflects a transition from crisis management to confidence management, a development which he said is critical for restoring macroeconomic credibility and rebuilding investor trust in the Nigerian economy.

“We also commend the fiscal authorities for the renewed commitment to fiscal consolidation and improved revenue performance. The sustainability of macroeconomic stability ultimately depends on the quality of fiscal discipline. Rising revenues should translate into lower fiscal deficits, reduced dependence on debt financing and stronger fiscal buffers.

The CPPE further applauds implementation of the banking sector recapitalisation program, describing it as seamless and non-disruptive.

It stressed that notably, the exercise has not triggered systemic anxiety, depositor panic, bank failures or significant erosion of shareholder confidence. This, it says demonstrates regulatory maturity, improved supervisory capacity and careful management of transition risks by the Central Bank.

“The recapitalisation programme is not merely a banking reform exercise; it is fundamentally a strategy for building a stronger financial intermediation framework capable of supporting long-term industrialisation, infrastructure financing and economic transformation. Strong economies are built on strong financial systems.

“However, for the few banks still dealing with recapitalisation-related transitional issues, it is imperative for the Central Bank to sustain clear communication and continuous reassurance to preserve depositors’ confidence in those banks and overall financial system stability. Confidence remains the oxygen of the financial system.

“Ultimately, the outcome of the 305th MPC meeting reflects a balanced and intelligent policy calibration — one that appropriately recognises that the ultimate objective of macroeconomic management is not merely to tame inflation statistics, but to create an environment that supports investment, productivity, competitiveness, industrialisation and sustainable job creation,” Yusuf added.