Mr. Segun Ajayi Kadir, Director-General of the Manufacturers Association of Nigeria (MAN), expressed concern over the Central Bank of Nigeria’s decision to raise the Monetary Policy Rate (MPR) by 150 basis points. He believes this increase will only add to the existing challenges businesses face in Nigeria, particularly in terms of costs. At a press conference held in Lagos on May 23, 2024, Ajayi-Kadir emphasized that imposing stricter regulations and higher interest rates on loans would result in higher production costs.
Stricter regulations could also result in restricted access to funds, and decreased competitiveness and Investment within the Manufacturing industry. In addition, he pointed out that recent choices made by the Monetary Policy Committee (MPC) would only worsen the difficulties currently faced by the sector. As per the Director General of MAN, the MPC appears to be more focused on the financial sector at the expense of the real sector, rather than striving for a well-rounded approach.
It could hinder the implementation of planned projects.
He pointed out that the current financial position will limit manufacturers’ opportunities for growth and innovation, making it difficult for them to invest in new technologies, expand their production capabilities, or reach out to new markets. The higher costs of borrowing and decreased access to funds will add to the challenges faced by manufacturers in these aspects. He warned that if this were to happen, it could hinder the implementation of planned projects, limiting the sector’s ability to expand and its impact on Economic Growth and development.
The choice of MPC will only add to the existing challenges faced in the business world, ultimately causing a reduction in the ability of Nigerian products to compete on a global scale. With a lending rate of over 30%, the affordability of borrowing will be impacted, resulting in Nigerian goods becoming less competitive on the global market compared to products from other countries. MPR has been steadily rising but unfortunately, has not led to any favourable outcomes.
CBN should consider different approaches to tackle inflation.
Ajayi-Kadir expressed gratitude towards the MPC for their work in tackling issues like Inflation and exchange rate changes affecting the economy. Despite this, he advised the committee to take into account the consequences on the real Economy and the overall impact on the country. He stressed the importance of working closely with government financial officials in order to enhance the industry’s longstanding impact on creating jobs, improving productivity, generating foreign revenue, and advancing the economy as a whole.
Furthermore, Ajayi-Kadir pointed out that despite increasing the MPR for almost two years, there has been no improvement in the situation. As a result, he recommended that the CBN should consider different approaches to tackle the root causes of inflation, with a specific emphasis on cost-driven factors. The Monetary Policy Committee made an announcement on May 22, 2024, that they will be raising the benchmark Interest Rate by 150 basis points, now standing at 26.25%.
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Additionally, this decision is a result of the central bank’s aggressive tightening of monetary policy in an effort to control inflation since the start of the year. The Central Bank of Nigeria has justified the frequent large increases in the Monetary Policy Rate during the past three Monetary Policy Committee meetings. This is seen as a strategic move to maintain the stability of the currency exchange rate and control the inflation rate, which has reached 33.69% as of April 2024.