The Centre for the Promotion of Private Enterprise (CPPE) has warned that continued reliance on high interest rates to manage Nigeria’s economy could undermine investment, job creation and economic growth, despite recent gains in macroeconomic stability.
In a statement on Sunday, the chief executive officer of CPPE, Muda Yusuf, said while the International Monetary Fund’s latest Article IV Consultation Report correctly acknowledged improvements in Nigeria’s economic fundamentals, greater policy balance was needed to ensure that economic reforms translate into tangible benefits for citizens.
Yusuf said the stabilisation measures implemented over the past three years had delivered notable gains, including improved foreign exchange market stability, stronger external reserves, increased capital inflows and enhanced investor confidence.
“The reforms have helped to stabilise the foreign exchange market, improve external sector balances, strengthen investor confidence and restore a measure of policy credibility,” he said.
According to him, the moderation in exchange rate volatility and the stronger performance of many listed companies indicate that the economy is gradually moving from instability to greater predictability.
However, he stressed that macroeconomic stability alone would not be enough if it failed to improve living conditions.
“Economic reforms are ultimately judged not only by their impact on macroeconomic indicators but also by their ability to improve the welfare of citizens,” Yusuf said.
“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.”
The CPPE chief expressed concern over what he described as excessive dependence on monetary tightening, warning that the cost of credit has become increasingly prohibitive for businesses.
While acknowledging that higher interest rates have contributed to inflation moderation and exchange rate stability, he argued that the policy may have reached a point where its costs outweigh its benefits.
“The cost of credit in Nigeria has reached levels that are becoming increasingly prohibitive for productive investment,” he said.
“Lending rates remain among the highest in the world, making it difficult for businesses to expand, invest or create jobs.”
Yusuf further noted that attractive yields on government securities were diverting funds away from productive sectors of the economy, as investors increasingly favour treasury bills and bonds over financing businesses.
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“An economy cannot achieve sustainable development when financial capital earns higher returns from government financial instruments than from supporting enterprise, innovation and industrialisation,” he stated.
The CPPE also faulted what it described as insufficient recognition by the IMF of the importance of development finance in supporting key sectors such as agriculture, manufacturing, housing and infrastructure.
According to Yusuf, these sectors require long-term and affordable financing that conventional commercial lending is often unable to provide.
“Development finance is not merely a policy choice; it is an economic necessity,” he said, adding that a purely market-driven financing model would be unable to address Nigeria’s structural funding gaps.
The organisation also warned that prolonged monetary tightening is increasing the government’s debt-service burden as elevated interest rates continue to push up domestic borrowing costs.
Yusuf said a growing share of government revenue is being devoted to debt servicing rather than critical investments in infrastructure, healthcare and education.
“This raises a critical policy question: how can Nigeria maintain macroeconomic stability while reducing the fiscal burden of expensive debt?” he asked.
He welcomed recent indications by the minister of finance that the federal government plans to refinance parts of its debt portfolio to lower financing costs, describing the move as a step in the right direction.
CPPE also echoed the IMF’s concerns over Nigeria’s growing dependence on foreign portfolio inflows, warning that such investments remain vulnerable to global economic shocks and changing investor sentiment.
“Sustainable external sector resilience cannot be built solely on portfolio flows,” Yusuf said. “Hot money can stabilise an economy temporarily; productive investment is what transforms it permanently.”
On poverty reduction, the think tank argued that conditional cash transfers should not remain the centrepiece of Nigeria’s social protection strategy.
Instead, it called for greater investment in agriculture, transportation, healthcare, education and rural infrastructure to reduce living costs and create economic opportunities.
“The most effective poverty reduction programme is one that reduces the cost of living and expands economic opportunities,” Yusuf said.
The organisation further noted that the IMF report did not sufficiently recognise the growing importance of state governments in driving economic reforms and reducing poverty, especially following improvements in federation allocations that have boosted sub-national revenues.
Yusuf maintained that the next phase of economic management should focus on turning macroeconomic gains into welfare gains and ensuring that economic reforms deliver shared prosperity.
“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,” he said.
Alex is a business journalist cum data enthusiast with the Pinnacle Daily. He can be reached via ealex@thepinnacleng.com, @ehime_alex on X