CPPE to CBN: Hold off on Interest Rate Hikes, Businesses Need Breathing Room!

The Centre for the Promotion of Public Enterprise (CPPE) has urged the Central Bank of Nigeria (CBN) to ease its monetary policy tightening stance in light of businesses’ ongoing struggles to recover from recent rate hikes.

This call comes ahead of the CBN’s Monetary Policy Committee (MPC) meeting scheduled for this month, following the release of the latest inflation figures by the National Bureau of Statistics (NBS), showing a rise in headline inflation to 33.69% in April from 33.20% in March.

Dr. Muda Yusuf, the Director-General of the CPPE, emphasized the need for a pause in monetary policy tools to allow the fiscal side of the economy to address supply-related issues affecting inflation dynamics. He stressed that businesses are still grappling with the aftermath of recent rate increases and advocated for a temporary softening of the monetary tightening stance.

While acknowledging the slowdown in inflation, particularly in headline and food inflation, the CPPE noted that the underlying drivers of price hikes, such as food, transportation, insecurity in farming communities, and structural challenges, have yet to subside. Dr. Yusuf reiterated the importance of fiscal authorities addressing these supply-side factors.

Additionally, Dr. Yusuf reiterated his call for the Nigerian Customs Service (NCS) to establish a quarterly exchange rate between N800 and N1000 for import duties assessment. He highlighted the adverse impact of exchange rate fluctuations on inflation and urged the CBN to peg the rate at a specified range to mitigate the pass-through effect on inflation.

The CPPE also commended the commencement of refining activities by the Dangote refinery, anticipating a positive impact on inflation in the short term.

The backdrop of Nigeria’s inflation rate rising to 33.69% in April, driven by increases in food and transport prices, underscores the urgency for policy interventions. The CBN’s recent interest rate hikes, with a cumulative increase of 600 basis points, reflect efforts to rein in inflation. The upcoming MPC meeting on May 20, 2024, will provide an opportunity for the CBN to review its monetary policy stance. Meanwhile, the NCS’s management of exchange rates for import duties continues to draw criticism, prompting calls for a more stable quarterly exchange rate.