The growing economic deterioration that has ravaged the country continues to have ripple effects on all sectors. With the constant devaluation of our currency and different sectors threatening nationwide strikes, the country seems on the brink of an imminent economic collapse. Recently, the Manufacturers Association of Nigeria (MAN) have faulted the Central Bank’s hike in the Monetary Policy Rate (MPR). This increase in interest rates will pose to deeply affect the performance level of the manufacturing sector in the country.
Considering the innumerable constraints that already affects the performance level of the manufacturing sector, this decision to increase the interest rate has been described by the association as not being manufacturer friendly. The Manufacturers Association of Nigeria (MAN) has issued a poignant warning to the Central Bank of Nigeria, that the latest hike in the interest rate by a hundred basis point, from 13 percent to 14 percent will be increasingly detrimental to the daily operations of the sector, amid numerous inherent issues.
Interest rate increase would stimulate a surge in the current lending rate.
The Director-General of the Manufacturers Association of Nigeria (MAN), Mr. Segun Ajayi-Kadir in a signed public statement, expressed the association’s concern as regards the imminent effects of this decision, stating that this development was a major regression away from the single-digit interest rate regime. According to him, the ripple effect of this increase in the interest rate is posed at regressing the recovery rate of the sector, whilst reducing the sector’s contribution to the country’s GDP, due to lackluster performances.
Due to the deteriorating economic reality, the Monetary Policy Committee (MPC) reviewed and increased the interest rate by 1 percent and on this, Mr. Segun Ajayi-Kadir averred that this increase would imminently stimulate a surge in the current lending rate which will remotely cause a major surge in costs, resulting in a critical situation where the prices of goods and services increase astoundingly, with low sales due to lack of purchasing power and a problem of numerous unsold products.
Sector struggled to operate under the rigorous fiscal and policy reforms.
Dwelling on the fact that the manufacturing sector has evidently been struggling to operate under the numerous fiscal and monetary policy reforms, the DG claimed that the association was hopeful that the rigorous conditions for the access of development funding will be lax, so as to enhance the free flow of long term loans at a single digit interest rate, to improve the situation of the manufacturing sector. He also forwarded the association’s expectations that the MPC must ensure that imminent readjustments of the interest rate solely consider core inflation and not base decisions off headlines and food inflation, which will protect the sector from the backlashes of the interest rate increases and guarantee economic growth.
Evaluating the rapid surge in the country’s inflation rate, Mr. Segun Ajayi-Kadir asserted that beyond the known causes of this inflation like food scarcity, insecurity and shortage of raw materials to enhance production, factors like fuel scarcity, devaluation of the currency and continuous growth in the supply of money, extremely contributed to the inflation rate. He also explained that the prevalence in inflation rates will affect the manufacturing sector due to the increased cost in production, which will also affect the capacity utilization, invention and profitability of these manufacturing companies.
Government must implement policies to fight the pressures of inflation.
The DG however advised that the government must implement policies with more evaluated measures to fight the pressures of inflation, whilst improving the sustained infrastructural developments so as to reduce tendencies of the country’s economy from being vulnerable to external inflation. He recommended that the country reduce its reliance on importations to encourage local sourcing through an integrative incentivized system. He also asserted that the oil industry must be strategically positioned to benefit from global developments that prompts an increase in the prices of crude oil, whilst implementing feasible policies that will encourage private investments in the industry.
Related Links
MAN: Website
The provided content is given for general information only and does not constitute a professional opinion, and users should seek their own legal/professional advice. AskNigeria.com accepts no responsibility for losses from any person acting or refraining from acting as a result of content contained in this website and/or other websites which may be linked to this website.
Fact Checking Tool – Snopes.com
