Business Briefings
CBN Rate Hold Gains Support Amid Inflation Fears
The Centre for the Promotion of Private Enterprise (CPPE) has backed the decision of the Central Bank of Nigeria (CBN) to retain all key monetary policy parameters, describing the move as necessary to sustain macroeconomic stability amid persistent inflationary pressures and rising global uncertainties.
The endorsement followed the outcome of the 305th Monetary Policy Committee (MPC) meeting where the apex bank retained the Monetary Policy Rate (MPR) at 26.5 percent, while also maintaining the asymmetric corridor around the benchmark rate.
The committee equally retained the Cash Reserve Ratio (CRR) at 45 percent for deposit money banks, 15 percent for merchant banks, and 75 percent for non-TSA public sector deposits.
In a policy statement, the CPPE said the MPC’s decision reflected a more balanced understanding of the current inflation environment and broader economic realities confronting the country.
According to the group, the decision demonstrated “policy maturity and strategic restraint” at a time when the global economy is facing heightened geopolitical and economic uncertainties.
The centre noted that tensions involving Iran, Israel and the United States had continued to fuel volatility in the global energy market, leading to higher crude oil prices and rising domestic production costs.
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It stated, “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.”
The CPPE stressed that Nigeria’s inflationary pressure was largely driven by supply-side constraints rather than excess domestic demand, arguing that monetary tightening alone could not resolve structural bottlenecks affecting prices.
“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 statement added.
The group maintained that while monetary policy remained an important stabilisation tool, it could not address supply chain disruptions, infrastructure deficits or geopolitical developments influencing global commodity prices.
According to the CPPE, additional rate hikes at this stage could have slowed investment activities, weakened industrial output and undermined economic recovery efforts already underway across several sectors of the economy.
The apex bank had explained that the decision to retain rates was influenced by persistent inflationary concerns and the need to preserve macroeconomic stability amid rising external risks.
The MPC cited the back-to-back increase in inflation figures recorded in March and April 2026 as a major factor behind its cautious stance.
The committee also retained the standing facilities corridor at +50/-450 basis points around the MPR.
Meanwhile, the CPPE commended the CBN for sustaining relative stability in the foreign exchange market, describing exchange rate stability as critical to rebuilding investor confidence and moderating imported inflation.
“A stable currency environment improves investor sentiment, moderates imported inflation, enhances planning predictability and reduces speculative distortions within the market,” the group stated.
The organisation further noted that recent reforms by the apex bank signaled a transition from crisis management to confidence management, adding that the development was necessary for restoring credibility in the Nigerian economy.
“Indeed, the recent policy direction of the Central Bank reflects a transition from crisis management to confidence management — a development that is critical for restoring macroeconomic credibility and rebuilding investor trust in the Nigerian economy,” the statement added.
The CPPE also praised fiscal authorities for ongoing efforts aimed at fiscal consolidation and improved government revenue performance.
The group highlighted the banking sector recapitalisation programme as another significant reform initiative capable of strengthening the financial system and supporting long-term economic growth.
According to the CPPE, the recapitalisation exercise had so far progressed without triggering panic within the financial system or creating major concerns among depositors and shareholders.
The centre stated that the programme represented a broader strategy to strengthen financial intermediation, improve infrastructure financing and support industrialisation across the economy.
It, however, urged the apex bank to sustain transparent communication with banks still addressing recapitalisation transition challenges in order to maintain public confidence in the financial sector.
The group said clear engagement with stakeholders would remain essential in preserving financial system stability and ensuring the successful completion of the recapitalisation programme.
The CPPE reiterated that a coordinated policy approach involving both monetary and fiscal authorities remained necessary to address structural weaknesses affecting growth and inflation in the country.
The organisation added that reforms targeted at improving productivity, reducing logistics costs and enhancing domestic production capacity would play a more effective role in easing inflationary pressures over the long term.