Presidential aide Tope Fasua has called for a rethink of Nigeria’s tight monetary policy framework, warning that prolonged high interest rates could slow economic growth without delivering the desired reduction in inflation.

Fasua, Special Adviser to President Bola Tinubu on Economic Affairs, spoke on Wednesday at the seventh Africa Emerging Markets Forum in Abuja.

He argued that Nigeria’s economic structure differs significantly from those of developed economies and South Africa, making the relationship between interest rates and inflation less direct and limiting the effectiveness of aggressive monetary tightening.

What Fasua is saying

Fasua said Nigeria’s monetary policy transmission mechanism remains weak because the economy is dominated by micro, small and medium enterprises (MSMEs), alongside a large informal sector with limited links to formal credit markets.

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  • “There seems to be a slightly unorthodox relationship between interest rates and inflation in Nigeria. The pass-through is not as direct as you would find in many developed countries,” Fasua said.
  • “So we run the risk that we may end up slowing down growth, or caging growth, while we’re trying to manage inflation,” he said.
  • “Nigeria is not a credit economy, not even as much as South Africa, where you still find many people holding credit cards,” Fasua said.
  • “We need to own our economy, own the structure of the economy and own the stage at which the economy is right now in order to make the right choices between monetary policy rates and other ways of tackling the future of the economy,” he said.

Fasua said policymakers should therefore consider Nigeria’s peculiar economic conditions rather than rely solely on conventional prescriptions for fighting inflation.

According to Fasua, fintechs and digital banks have improved payments and deposit mobilisation, but access to credit remains limited, weakening the transmission of monetary policy to businesses and households.

He said reductions in the Monetary Policy Rate (MPR) may also have only a marginal effect on lending rates.

Nigeria’s economy is dominated by MSMEs and a large informal sector that remains weakly connected to formal credit markets.

  • “In Nigeria, very few banks offer credit cards to people,” Fasua said.
  • “If you reduce the MPR, banks will probably reduce their lending rates by just one percent,” he said.

He argued that inflation has largely been driven by supply-side constraints and market dynamics rather than excessive consumer demand.

Fasua said Nigerians spend much of their income on food, housing, education and other essential services, leaving consumers with limited bargaining power over prices.

More Insights

Nigeria’s Monetary Policy Rate (MPR) has undergone one of its most aggressive tightening cycles in recent history under the leadership of Central Bank of Nigeria (CBN) Governor Olayemi Cardoso, before transitioning into a gradual easing phase from late 2025 through 2026.

  • Following President Bola Tinubu’s appointment of Cardoso as CBN governor in 2023, the apex bank adopted a mix of monetary and fiscal reforms aimed at restoring macroeconomic stability. The reforms included the liberalisation of the foreign exchange market and an aggressive monetary tightening campaign to curb soaring inflation and stabilise the naira.
  • The MPR stood at 18.75% in 2023 before the CBN raised it by 400 basis points to 22.75% in February 2024. Subsequent rate hikes throughout 2024 pushed the benchmark interest rate to 27.5% by the end of the year, as the apex bank sought to rein in persistent inflationary pressures.
  • Alongside the rate hikes, the CBN also tightened liquidity conditions by increasing the Cash Reserve Ratio (CRR) for commercial banks from 32.5% to 45% in early 2024, before raising it further to 50% to absorb excess liquidity from the banking system.

With inflationary pressures beginning to moderate, the CBN initiated a cautious easing cycle at its 302nd Monetary Policy Committee (MPC) meeting in late 2025, cutting the MPR by 50 basis points from 27.5 per cent to 27 per cent.

The committee left the rate unchanged at its 303rd meeting before implementing another 50-basis-point reduction at its 304th meeting in February 2026, bringing the benchmark rate to 26.5%.

The MPC has since maintained the MPR at 26.5 per cent at both its 305th and 306th meetings, signalling a cautious approach as policymakers balance the need to support economic growth with efforts to sustain disinflation and exchange rate stability.

What you should know

Nairametrics reported that inflation rose to 34.8% in December 2024 before subsequently moderating to about 15.9% in June 2026.

The National Bureau of Statistics reported that Nigeria’s economy recorded a real Gross Domestic Product (GDP) growth of 3.89% year-on-year in the first quarter of 2026.

Nairametrics earlier reported that Nigeria’s economy grew by 4.07% year-on-year in real terms in the fourth quarter (Q4) of 2025.