CPPE criticizes CBN rate hike, warns of harm to investment, growth

The Centre for the Promotion of Private Enterprise (CPPE) has condemned the Central Bank of Nigeria’s (CBN) recent interest rate hike, saying it will harm investment and stifle economic growth.

Muda Yusuf, CEO of CPPE, expressed concerns in a statement on Tuesday, noting that Nigeria’s economy requires stimulus, not policies that further constrict businesses.

Earlier that day, the CBN’s Monetary Policy Committee (MPC) raised the monetary policy rate (MPR) from 26.75% to 27.25%, a move announced by CBN Governor Olayemi Cardoso. The MPC also increased the cash reserve ratio (CRR) from 45% to 50%.

Yusuf said businesses are already struggling under tough economic conditions, and this rate hike adds further strain.

“At a time when manufacturers and investors need relief, the CBN is tightening the noose,” he said. “This policy contradicts the desire for economic recovery and growth.”

Yusuf also pointed out that most of the liquidity pressures come from the public sector, urging the CBN to address this issue directly rather than burdening the private sector.

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“It is quite troubling that at a time when manufacturers, entrepreneurs, and other investors in the economy are craving for a breath of fresh air, the CBN chose to tighten the noose on them by resorting to a further tightening of monetary policy,” he said.

“The latest policy choice of the apex bank is at variance with the mood of most economic players and the desire to promote economic recovery and growth.

“What manufacturers and other investors need at this time is some oxygen and stimulus, not policy measures that would worsen an already suffocating situation.”

He warned that the higher CRR will restrict banking operations and worsen the cost of borrowing, negatively affecting the economy.

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“Issues of excess liquidity should be addressed within a causative context. The injection of liquidity into the system is largely public sector-driven, as rightly noted by the CBN governor. Therefore, the focus of resolving it should be within that context.

“Stifling the financial conditions to address liquidity issues is detrimental to investment and growth of the economy. The implication of the latest MPC decision for investors is quite concerning as cost of funds would be further exacerbated, possibly well above 35% or more. It is made worse by the increase in CRR to 50% and retention of an asymmetric corridor of +500 and -100.”

He concluded that the CBN’s actions are ill-suited for Nigeria’s current economic challenges, calling for policies that support, rather than hinder, business growth.