The Manufacturers Association of Nigeria (MAN), the biggest organized private sector (OPS) group in the country, has expressed concern on the jacking up of the Monetary Policy Rate (MPR) by the Central Bank of Nigeria (CBN) in view of the implications for cost of doing businesses in the country and the Gross Domestic Product (GDP) output in the immediate term.
The Director-General of the OPS group, Mr. Segun Ajayi-Kadir, described the raising of the benchmark lending rate by the Monetary Policy Committee (MPC) of the apex bank at the end of its 2-day meeting last Tuesday by 150 basis points, as undesirable as the measure would raise production costs, reduce business owners’ access to funds and reduce investment in the real sector of the economy.
The industrialist, who expressed the association’s concerns on the measure at a media briefing on Thursday in Lagos, pointed out that the committee appeared to have prioritized financial sector over the manufacturing and other key sectors in taking the decision rather than seeking a balanced monetary policy approach.
Specifically, the Director-General noted that the apex bank’s continued hawkish monetary policy stance would hamper investment and expansion in the manufacturing sector and constrain the investors’ ability to invest in new technologies, expand their operations and explore opportunities in new markets, among other negative impacts on the real sector.
Ajayi-Kadir further expatiated: “As a result, this could lead to delays or cancellations of planned initiatives, ultimately constraining the sector’s potential for growth and its overall contribution to economic growth and development.
“the decision by the MPC will further compound the already high cost of doing business, consequently diminishing the competitiveness of Nigerian products in the global market.
“The high lending rate exceeding 30% will increase the cost of borrowing and make Nigeria’s goods less competitive to products from other nations”, the Director-General stressed.
While acknowledging the apex bank committee’s efforts in tackling the country’s surging inflation rates and foreign exchange rate fluctuations over the past months, he advised the monetary authorities’ committee to always consider the impact of its decisions on the real sector, and the broader effects on the country.
The industrialist also harped on the need for the CBN to collaborate with the fiscal authorities as a strategic step towards bolstering the real sector’s role in driving job creation, productivity, foreign exchange earnings and sustainable growth for Nigeria.
According to him, since jacking up the benchmark lending rate for nearly two years how has not yielded the desired results, especially in moderating the inflation rate, the apex bank should begin to explore alternative options to address the underlying causes of rising inflation, including by primarily focusing on cost-push factors.
