The warning was issued in a statement on Sunday signed by the organisation’s Chief Executive Officer, Muda Yusuf, who argued that higher interest rates may deepen existing structural weaknesses in the economy rather than resolve them.
The MPC is scheduled to meet on 19 and 20 May, following its February decision to reduce the benchmark lending rate by 50 basis points to 26.5 per cent. Expectations ahead of the meeting have been shaped by rising inflationary pressures, global market uncertainty, and domestic liquidity concerns.
“Further tightening could weaken the real sector”
CPPE cautioned that additional monetary tightening could have far-reaching consequences for businesses, investment flows, and employment generation.
“The Nigerian economy remains fragile and structurally constrained. Further tightening of monetary conditions could significantly weaken credit expansion, dampen investment appetite, and undermine the fragile momentum of the real-sector recovery,” the group stated.
It further warned that elevated interest rates could increase loan defaults, strain business sustainability, and heighten pressure on public finances through rising debt servicing costs.
Global tensions and inflation risks
The think tank also pointed to external shocks, noting that geopolitical tensions involving the United States, Israel, and Iran have already disrupted global oil markets, with ripple effects expected to hit Nigeria’s energy costs and inflation levels.
“Of immediate significance are the escalating geopolitical tensions involving the United States, Israel, and Iran, which have triggered renewed volatility in the global energy market,” the statement said.
It added that rising crude oil prices were already feeding into higher domestic costs for transportation, logistics, and production, further compounding inflationary pressures.
Domestic liquidity concerns ahead of elections
Beyond global risks, CPPE raised concerns about domestic liquidity expansion linked to political activities ahead of the 2027 general elections. It warned that increased election-related spending, combined with rising Federation Account Allocation Committee (FAAC) allocations to states, could worsen inflationary trends.
“At the domestic level, early signs of election-related liquidity injections ahead of the 2027 electoral cycle are also becoming increasingly evident,” it noted.
The organisation also referenced ongoing engagements between the CBN and state governments on inflation risks tied to fiscal spending, describing them as evidence of growing concern over excess liquidity.
“Monetary tightening has limited impact on structural inflation”
CPPE argued that Nigeria’s inflation problem is largely driven by supply-side constraints rather than excessive demand, making interest rate hikes less effective as a policy response.
“The major inflation drivers remain energy costs, transportation expenses, logistics bottlenecks, and structural inefficiencies within the production environment,” it said.
According to the group, monetary tightening is better suited for demand-driven inflation and may not address the root causes of Nigeria’s current price pressures.
Call for balanced policy direction
Rather than aggressive tightening, CPPE urged the CBN to adopt a more balanced monetary stance that supports growth while still maintaining price stability.
“The CPPE therefore advocates a carefully calibrated and balanced monetary policy stance that preserves macroeconomic stability while avoiding excessive tightening capable of undermining economic recovery and private sector resilience,” the statement read.
It concluded that sustainable disinflation in Nigeria would depend more on structural reforms—such as improvements in energy supply, logistics, exchange rate stability, and domestic production capacity—than on restrictive monetary policy alone.