The Manufacturers Association of Nigeria (MAN) has aired their dissatisfaction with the latest interest rate increase announced by the Monetary Policy Committee (MPC) of the Central Bank of Nigeria (CBN).
A few days ago, the CBN MPC increased its monetary policy interest rates to 18.5 per cent.
OsunDaily News understands that the decision was taken following a meeting by the apex bank MPC on Wednesday, May 24.
Members of the MPC are said to have voted to increase the benchmark interest rate by 50 basis points to 18 per cent.
While reading the communique of the third MPC meeting of the year on Wednesday, CBN Governor, Godwin Emefiele, said the committee voted to keep the asymmetric corridor at +100 and -700 basis points around the MPR.
According to him, the apex bank had effected the fifth consecutive increase in MPR in a bid to curb inflation.
However, MAN has noted that the latest policy measure undermines real sector growth.
OsunDaily News understands that with the latest markup, lending rates are expected to notch up to 25 per cent for prime and over 30 per cent for others.
“The increase will compound the imminent recession in the manufacturing sector and negatively impact its operations in so many ways,” the Director General of MAN, Segun Ajayi-Kadir, noted in a statement made available to newsmen on Thursday, May 25.
Ajayi-Kadir warned that the MPR hike can, among other challenges, lead to an “Increase in the cost of borrowing that will further discourage investments in the sector; High cost of production which will lead to higher commodity prices and inventory of unsold manufactured products; Decline in capacity utilization owing to high-interest rate and reduction in sales; Reduction in the output of the sector which will further reduce the national productivity and per capita income; Decline in government revenue as a result of low productivity of the manufacturing sector and the resulting low taxes; and High product prices owing to rising factor costs, which will, in turn, render the sector less competitive.”
He further stated: “It is evident that the continuous and consistent increase in MPR is not yielding the desired growth in the economy. The Nigerian economy remains fragile and bedeviled with numerous challenges that inhibit growth. Therefore, the monetary authority needs to pay closer attention to rethink the policy mix, bearing in mind the parlous state of the economy, especially the effect of a high MPR on the manufacturing sector and the economy.
“The increase in MPR from 18% to 18.5% will certainly lead to an increase in lending rates and worsen the uncompetitiveness of the manufacturing sector.
“This increase, like the previous ones, is evidence that the CBN is either unperturbed about the plight of the productive sector or is unable to fathom out a more creative policy mix that would reflate the sector.
“Therefore, it is necessary for government to think outside the conventional monetary policy framework and take pragmatic steps to quell the inflationary pressure and reposition the economy.”
