Edidiong Ikpoto and Anozie Egole
The Manufacturers Association of Nigeria and the Nigeria Employers’ Consultative Association have said the recent increase of the Monetary Policy Rate by the Central Bank of Nigeria will compound the imminent recession in the manufacturing sector and negatively impact its operations in many ways.
MAN, in a statement on Thursday, said the MPR hike would also increase the cost of borrowing which would further discourage investments in the sector.
It also said this would lead to a high cost of production which will lead to higher commodity prices and inventory of unsold manufactured products.
The statement read in part, “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 per cent to 18.5 per cent will certainly lead to an increase in lending rates and worsen the uncompetitiveness of the manufacturing sector. The Association has been clamoring for single-digit lending rates to allow manufacturers access needed funds to boost the performance of the 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.”
Also, NECA urged the government especially, the monetary policy authority, to tackle inflation by addressing the issue of imported inflation.
The Director General of NECA, Mr Wale Oyerinde, in a chat with one of our correspondents, said, “The current trend in price development would continue to be monitored by the bank with greater collaboration with fiscal authority to address the drivers of inflation.”
Analysts in the country had predicted the CBN and the MPC might raise the lending rates at the end of the Monetary Policy Committee.
The apex bank had increased the MPR from 11.5 per cent earlier last year to 18 per cent in March this year across six consecutive rate hikes.
Oyerinde advised the government especially, the monetary policy authority, to tackle inflation by addressing the issue of imported inflation.
He said with the increase in MPR by 18.5 per cent, businesses could be at risk of addition increase in production cost which could lead to higher inflation.
He said, “This could lead to even higher inflation, which CBN is focused on arresting. We, therefore, suggest a revaluation of the CBN’s decision of continuing tightening the monetary space. We discouraged further increase in the lending rate, rather we suggest coordination of monetary and fiscal measures that will resonate to stimulate the growth trajectory of the economy. Addressing the high energy prices, high cost of transportation, and insecurity that usually lead to a higher cost of production need be addressed to curb inflation.”