CPPE backs IMF assessment of Nigeria reforms, warns against prolonged high interest rates

THE Centre for the Promotion of Private Enterprise (CPPE) has welcomed the positive assessment of Nigeria’s economic reforms contained in the latest IMF Article IV Consultation Report but cautioned that policymakers must strike a better balance between macroeconomic stability and economic welfare.

In a statement issued on Sunday, Chief Executive Officer of CPPE, Dr. Muda Yusuf, said the IMF’s recognition of progress in restoring macroeconomic stability aligns with the views consistently expressed by the private sector advocacy group.

According to Yusuf, recent reforms have contributed to greater stability in the foreign exchange (FX) market, improved external sector balances, stronger investor confidence and a recovery in capital inflows.

He noted that reduced exchange rate volatility, rising foreign reserves and improved performance by many listed companies demonstrate the benefits of the stabilisation measures implemented over the past 3 years.

While acknowledging these gains, CPPE stressed that economic reforms should ultimately be judged by their impact on citizens’ welfare.

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The organisation agreed with the IMF’s concerns over persistent poverty and food insecurity, arguing that exchange rate stability, reserve accumulation and fiscal consolidation must translate into lower food prices, improved incomes, job creation and better living standards.

“The next phase of economic management should focus on converting macroeconomic gains into welfare gains,” Yusuf said, adding that policymakers must move beyond stabilisation towards achieving inclusive prosperity.

CPPE, however, expressed reservations about what it described as the IMF’s continued support for tight monetary policy, warning that prolonged high interest rates could undermine investment, business growth and employment creation.

According to the group, lending rates in Nigeria have become increasingly prohibitive for productive investment, while high yields on government securities have encouraged investors to channel funds into treasury bills and bonds instead of financing businesses and productive sectors.

“An economy cannot achieve sustainable development when financial capital earns higher returns from government financial instruments than from supporting enterprise, innovation and industrialisation,” the statement said.

The organisation also defended the role of development finance interventions, arguing that sectors such as agriculture, manufacturing, housing and infrastructure require long-term capital that conventional market-based financing often fails to provide.

CPPE maintained that development finance should be viewed as a response to market failures rather than a distortion of the financial system, particularly in an economy where commercial lending remains expensive, short-term and risk-averse.

The group further warned that sustained monetary tightening has increased the government’s domestic borrowing costs, leading to higher debt-service obligations and reducing fiscal space for infrastructure, healthcare and education spending.

It called for closer collaboration between fiscal and monetary authorities to develop strategies for lowering borrowing costs without compromising financial stability.

CPPE also supported recent efforts by the Nigerian government to refinance parts of its debt portfolio in a bid to reduce debt-servicing costs, describing the move as a step in the right direction.

On external financing, the organisation shared the IMF’s concerns about Nigeria’s growing dependence on foreign portfolio inflows, noting that such investments are highly sensitive to changes in global market conditions.

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It argued that long-term economic resilience should be driven by stronger exports, increased productivity, foreign direct investment and improved competitiveness rather than short-term portfolio capital.

The think tank also questioned the effectiveness of making conditional cash transfers the centrepiece of Nigeria’s social protection strategy, citing challenges related to beneficiary identification, transparency and governance.

Instead, it advocated greater public investment in agriculture, transportation, healthcare, education and rural infrastructure to reduce living costs and create lasting economic opportunities.

According to CPPE, reducing the cost of living and expanding access to economic opportunities remain the most effective tools for tackling poverty.

The organisation further argued that the IMF report paid insufficient attention to the role of state governments in driving economic reforms and development outcomes.

It noted that increased federation allocations have significantly boosted the fiscal resources available to sub-national governments, making their spending priorities crucial to achieving food security, infrastructure development, healthcare improvements and poverty reduction.

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

He added that while macroeconomic stability may help rescue an economy from crisis, shared prosperity is essential for sustaining public support for reforms and should define the next phase of Nigeria’s economic journey.