Expert calls for halt in interest rate hikes by CBN’s Monetary Policy Committee 

The Centre for the Promotion of Private Enterprise (CPPE) has called upon the Monetary Policy Committee (MPC) of the Central Bank of Nigeria (CBN) to halt further increases in interest rates.

Dr. Muda Yusuf, Chief Executive Officer of CPPE, emphasized that pausing interest rate hikes would provide an opportunity for fiscal policy measures to address inflation.

The 299th MPC meeting of the CBN is scheduled for Tuesday and Wednesday.

Yusuf expressed concerns that additional interest rate hikes would have adverse effects on the manufacturing and real sectors.

Expectations from the CBN’s MPC meeting 

“My expectation from the MPC meeting is to maintain a hold, however, my preference is to begin relaxing some of the tightening measures due to the excessively high interest rates,” Yusuf stated. 

He added, “I do not anticipate further hikes in the Monetary Policy Rate (MPR) or the Cash Reserve Ratio (CRR). I believe it is time to pause these hikes and allow fiscal policy measures to tackle inflation.” 

Yusuf highlighted that a significant portion of inflation is driven by supply-side issues, particularly energy, production, and import costs.

He stressed the important role of fiscal authorities in moderating these costs, as the current interest rate is hindering investment, job creation, and entrepreneurship.

“In the worst-case scenario, there should be a pause in rate hikes. However, my preference is to begin relaxing some of these tightening measures to provide relief to the real economy,” Yusuf explained. 

He also emphasized the need to enhance fiscal policy interventions, particularly regarding energy, import, and transportation costs, which are closely linked to energy costs.

Yusuf expressed optimism about the global outlook for the energy sector due to policies of U.S. President Donald Trump.

He noted that the outlook for energy costs appears more favorable for businesses, although it may have negative implications for revenue.

He pointed out that a potentially positive global outlook for energy costs, partly due to U.S. policies, could lead to decreases in the prices of crude oil, PMS, diesel, and gas, especially with ongoing efforts towards peace in Ukraine and Russia.

Furthermore, Yusuf underscored the importance of the Nigerian government providing incentives for the real economy to lower costs.

“We should also manage our fiscal operations well to avoid overheating the economy from the fiscal side,” he added. 

What you should know 

• Nigeria’s current interest rate stands at 27.5 per cent, while the inflation rate is 34.6 per cent.
• The MPC meeting is a crucial event that shapes Nigeria’s economic outlook, influencing decisions on interest rates, inflation control, and overall macroeconomic stability.
• A recent report from the Central Bank of Nigeria indicated that Nigeria’s economic activities expanded for the second consecutive month.
• The composite Purchasing Managers’ Index (PMI) for January 2025, at 50.2 index points, signaled an expansion in economic activities for the second straight month.

Three sectors—industry, services, and agriculture—stood out in the report. The Industry Sector improved from a stationary position in December 2024 to an expansionary level in January 2025.

Conversely, the Services Sector index indicated a contraction in economic activities for the month, while the Agriculture Sector registered expansion for the sixth consecutive month.

The breakdown of the index showed that composite output, new orders, and employment levels recorded growth at 50.9, 50.2, and 50.2 points, respectively, reflecting overall expansion during the review period.

However, the composite stock of raw materials declined to 49.8 points, and the suppliers’ delivery time slowed further to 49.6 index points, suggesting delays in supply chains.