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The President of the Capital Market Academics of Nigeria (CMAN), Uche Uwaleke, has urged the Central Bank of Nigeria (CBN) to begin a gradual reduction in interest rates and revive development finance through specialised institutions, warning that persistently high borrowing costs are constraining investment, business expansion, and job creation.
Uwaleke made the call on Monday in Abuja during a world press conference organised by CMAN, arguing that Nigeria’s inflation has become increasingly structural and cost-push in nature, making repeated interest rate hikes a less effective tool for controlling price pressures.
According to him, monetary policy should gradually rely less on increases in the Monetary Policy Rate (MPR) as the primary instrument for inflation management.
“CMAN respectfully advises that, as inflationary pressures become increasingly structural and cost-push in nature, monetary policy should gradually rely less on repeated increases in the Monetary Policy Rate as the primary instrument for controlling inflation,” he said.
Uwaleke noted that while elevated interest rates may help moderate aggregate demand, they also raise borrowing costs, discourage productive investment, and weaken private sector expansion.
“Excessively high interest rates, while helping to moderate aggregate demand, also increase the cost of borrowing, discourage productive investment, and constrain business expansion,” he said.
He therefore advocated a carefully managed easing of monetary conditions as inflation expectations improve, supported by fiscal reforms aimed at addressing supply-side constraints.
“We encourage a gradual moderation of the interest rate environment as inflation expectations continue to improve. This should, of course, be undertaken cautiously and supported by complementary fiscal measures aimed at addressing supply-side bottlenecks,” he added.
On development finance, Uwaleke cautioned that the apex bank’s renewed focus on price stability should not come at the expense of targeted funding for productive sectors of the economy.
He called on the CBN to create room for development finance interventions through existing specialised institutions rather than directly administering intervention programmes.
“Accordingly, we call upon the Central Bank to create appropriate room for carefully designed development finance interventions through existing Development Finance Institutions. Rather than directly administering intervention programmes, the Bank can continue to provide strategic support through specialised institutions that possess the expertise to finance agriculture, manufacturing, exports, housing, and small businesses,” he said.
His remarks come as the CBN, under Governor Olayemi Cardoso, continues its policy shift away from direct intervention lending toward inflation control and investor confidence restoration. The apex bank retained the Monetary Policy Rate at 26.5 per cent at its May 2026 meeting.
While commending recent monetary reforms, Uwaleke praised the clearance of more than $7 billion in inherited foreign exchange obligations, the discontinuation of Ways and Means financing, banking sector recapitalisation, and foreign exchange reforms, noting that these measures have helped restore confidence in Nigeria’s financial system and improve investor sentiment.
He also commended the Federal Government for implementing long-delayed reforms, including fuel subsidy removal, exchange rate unification, and the Nigerian Tax Acts 2025, describing them as critical steps toward restoring macroeconomic stability.
However, he stressed that the gains from these reforms have yet to translate into broad-based economic relief for households and businesses.
According to him, economic progress should not be measured solely by stronger market indicators such as rising stock prices, growing external reserves, or improved sovereign ratings.
“Economic success should not be measured solely by rising stock prices, improving reserves or favourable sovereign ratings,” he said, noting that many Nigerians continue to face high living costs, weak purchasing power, and limited access to affordable credit.
Uwaleke observed that lending rates remain prohibitively high despite improvements in banking sector strength, while private sector credit relative to Gross Domestic Product continues to decline.
Although headline inflation has eased to about 15.9 per cent, he noted that rural inflation remains elevated due to structural challenges such as insecurity, poor transport infrastructure, inadequate storage facilities, and unreliable electricity supply. He added that geopolitical tensions in the Middle East have further increased pressure through rising energy costs.
The economist noted that Nigeria’s economy expanded by 3.89 per cent in the first quarter of 2026 but described the pace of growth as insufficient to significantly reduce poverty or unemployment.
He said the growth remained modest because critical sectors such as agriculture and manufacturing continue to underperform relative to their job creation potential.
Uwaleke also raised concerns over Nigeria’s increasing dependence on short-term foreign portfolio flows, warning that such capital remains highly volatile.
According to him, more than 95 per cent of the over $10 billion in capital imported during the first quarter of 2026 came from portfolio investors rather than long-term foreign direct investment.
He urged policymakers to attract more productive and durable investment by ensuring policy consistency, improving security, and strengthening contract enforcement mechanisms.
The economist further expressed concern over Nigeria’s rising public debt, which exceeded N159 trillion at the end of 2025, warning that widening fiscal deficits and weak capital expenditure could undermine long-term infrastructure development.
To address infrastructure financing gaps, he advocated greater use of the capital market through project-linked instruments such as Sukuk and Green Bond, rather than relying heavily on conventional Federal Government bonds, which currently account for nearly 80 per cent of domestic debt.
To deepen capital market participation, Uwaleke urged the Federal Government to incentivise more indigenous and state-owned enterprises to list on the Nigerian Exchange Group by introducing tax relief measures, including reducing Company Income Tax for listed firms from 30 per cent to 25 per cent.
He also commended the Securities and Exchange Commission and the Nigerian Exchange Group for market reforms such as the T+1 settlement cycle and extended trading hours, while urging regulators to further improve liquidity, strengthen fintech integration, promote sustainable finance, and expand retail investor participation.
Uwaleke welcomed the forthcoming Capital Market Master Plan and the Investments and Securities Act 2025, describing both as important frameworks for enhancing investor protection and positioning Nigeria’s capital market for long-term growth.
He concluded that while recent reforms have improved macroeconomic stability, strengthened the banking sector, and boosted investor confidence, their ultimate success must be measured by tangible improvements in living standards.
According to him, sustainable economic progress must translate into affordable credit, stronger infrastructure, more jobs, and meaningful poverty reduction.
“Our collective challenge is therefore to ensure that macroeconomic stability evolves into inclusive prosperity,” he said.
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