The Centre for the Promotion of Private Enterprise (CPPE) welcomes the positive assessment of Nigeria’s economic reforms contained in the IMF Article IV Consultation Report. The Fund’s acknowledgement of the progress made in restoring macroeconomic stability is broadly consistent with the position consistently advanced by CPPE and many stakeholders within the Nigerian private sector.
The reforms have helped to stabilize the foreign exchange market, improve external sector balances, strengthen investor confidence and restore a measure of policy credibility. The moderation in exchange rate volatility, the improvement in foreign reserves, the recovery in capital inflows and the stronger performance of many quoted companies underscore the positive outcomes of the stabilization measures undertaken over the past three years.
These gains are significant. After years of macroeconomic distortions, the economy is gradually moving from a regime of instability to one of greater predictability. This is an important foundation for investment, productivity and sustainable growth.
Stabilization Must Translate to Welfare Gains
CPPE also agrees with the IMF’s concern about the persistence of poverty and food insecurity despite the progress made on macroeconomic stabilization.
Economic reforms are ultimately judged not only by their impact on macroeconomic indicators but by their ability to improve the welfare of citizens. Exchange rate stability, reserve accumulation and fiscal consolidation are important, but the true test of reform is whether they translate into lower food prices, better jobs, improved incomes and enhanced living standards.
The next phase of economic management should therefore focus on converting macroeconomic gains into welfare gains. The challenge before policymakers is no longer merely one of economic stabilization; it is increasingly one of inclusive prosperity.
The Risk of Extreme Monetary Orthodoxy
While the IMF’s support for monetary tightening reflects conventional stabilization thinking, CPPE is concerned about the continued emphasis on high interest rates without sufficient consideration of the adverse consequences for investment, enterprise growth, job creation and sovereign debt service pressures.
The current monetary policy stance has delivered some benefits in terms of inflation moderation and exchange rate stability. However, every policy instrument has a point of diminishing returns. Beyond that point, the costs may begin to outweigh the benefits.
The cost of credit in Nigeria has reached levels that are becoming increasingly prohibitive for productive investment. Lending rates remain among the highest in the world, making it difficult for businesses to expand, invest or create jobs.
High yields on government securities have also intensified the crowding-out effect in the financial system. Banks and investors are increasingly channeling resources into treasury bills and government bonds rather than financing productive sectors of the economy. As a consequence, capital is gravitating towards financial assets rather than productive assets.
An economy cannot achieve sustainable development when financial capital earns higher returns from government financial instruments than from supporting enterprise, innovation and industrialization.
Development Finance Remains Imperative
The IMF also appears not to sufficiently appreciate the developmental role of targeted financing interventions in an economy like Nigeria. Development finance is not merely a policy choice; it is an economic necessity. Left entirely to market forces, critical sectors such as agriculture, manufacturing, housing and infrastructure would remain chronically underfunded, thereby constraining productivity, job creation, industrialisation and long-term economic growth.
Nigeria’s economic structure differs fundamentally from those of advanced economies. Strategic sectors such as agriculture, manufacturing, housing and infrastructure require long-term, patient capital which conventional market-based financing channels are often unable or unwilling to provide efficiently.
In an economy where commercial lending is largely short-term, costly and risk-averse, development finance remains indispensable for unlocking productivity, supporting investment, expanding output and driving inclusive growth. A purely market-driven financing model cannot adequately address Nigeria’s structural financing gaps.
Agriculture, for instance, cannot sustainably absorb commercial credit priced at prevailing market rates. Infrastructure projects often require financing tenors extending beyond what conventional banking structures can support.
Development finance, therefore, should not be perceived as a distortion of the financial market; it is often a necessary response to market failure. Economic transformation has historically been supported by development finance institutions across both developed and emerging economies.
Monetary Tightening and the Rising Burden of Debt Service
Another important issue that deserves greater attention is the impact of prolonged monetary tightening on public finance.
Elevated interest rates have significantly increased the cost of domestic borrowing. Government bond yields remain exceptionally high, leading to rising debt-service obligations and shrinking fiscal space. A substantial portion of public revenue is now devoted to debt servicing rather than infrastructure, healthcare, education and other growth-enhancing investments.
This raises a critical policy question: how can Nigeria maintain macroeconomic stability while reducing the fiscal burden of expensive debt? CPPE believes that the monetary authorities and fiscal authorities should work collaboratively to design a pathway towards lower borrowing costs without undermining financial stability.
The recent indication by the Minister of Finance that the Federal Government intends to refinance portions of its debt portfolio to reduce debt service costs is a step in the right direction. Debt service remains one of the most significant fiscal challenges facing the country, making it imperative to fast-track measures that can lower financing costs and improve public sector financial resilience.
Over-Reliance on Portfolio Flows
CPPE shares the IMF’s concern regarding the growing dependence on foreign portfolio inflows.
Portfolio investments can provide valuable liquidity and support exchange rate stability. However, they are also highly volatile and vulnerable to shifts in global risk sentiment.
The rollover risks highlighted by the IMF deserve serious attention, particularly in an increasingly uncertain global environment characterized by geopolitical tensions, trade disruptions and financial market volatility.
Sustainable external sector resilience cannot be built solely on portfolio flows. It must rest on stronger exports, higher productivity, increased foreign direct investment and a more competitive domestic economy. Hot money can stabilize an economy temporarily; productive investment is what transforms it permanently.
Beyond Cash Transfers: Investing in Economic Inclusion
CPPE is not persuaded that conditional cash transfers should remain the centrepiece of Nigeria’s social protection strategy. While cash transfers may provide temporary relief for vulnerable households, their effectiveness is constrained by significant challenges relating to beneficiary identification, data integrity, transparency and governance.
A more sustainable and impactful approach would be to invest directly in the factors that drive the cost of living. Greater public investment in agriculture would reduce food inflation. Investments in mass transit systems, rail infrastructure and logistics would lower transportation costs. Improved spending on healthcare, education, water supply and rural infrastructure would enhance human capital and productivity.
Such investments create lasting economic value while delivering broad-based social benefits.
The most effective poverty reduction programme is one that reduces the cost of living and expands economic opportunities.
The Missing Dimension: The Role of Sub-National Governments
One area where the IMF report could have been stronger is in its recognition of the critical role of sub-national governments.
Following recent improvements in federation revenue allocations, state governments now command significantly greater fiscal resources. Consequently, their spending priorities have become increasingly important to the success of economic reforms.
Many of Nigeria’s most pressing development challenges—including food production, rural infrastructure, basic education, primary healthcare and local security interventions—fall substantially within the responsibilities of state governments.
Any serious conversation about economic reform, poverty reduction and inclusive growth must therefore incorporate the role of the states. Economic transformation in a federation cannot be driven from the centre alone.
Macroeconomic stability may rescue an economy from crisis, but shared prosperity is what secures public confidence in reform. That should be the defining objective of the next phase of Nigeria’s economic journey.
DR MUDA YUSUF
CHIEF EXECUTIVE OFFICER
CENTRE FOR THE PROMOTION OF PRIVATE ENTERPRISE [CPPE]
14TH JUNE 2026
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