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  • Business - Companies
  • Updated: July 22, 2022

Interest Rate Increase Not The Solution To Inflation, LCCI Warns CBN

Interest Rate Increase Not The Solution To Inflation, LCCI W

The Central Bank of Nigeria has been warned by the Lagos Chamber of Commerce and Industry to look beyond rate hikes in its bid to tackle the surging inflation. 

The LCCI said this in a statement titled ‘LCCI on CBN’s interest rate increase,’ where it urged the CBN to look into issues like foreign exchange scarcity, insecurity, rising costs of fuels, and weak infrastructural support for production, adding that the economy could suffer from massive capital flight with a negative effect on the naira exchange rate.

The statement reads in part, “The Monetary Policy Committee of the Central Bank of Nigeria, at its third meeting this year, raised the MPR from 13 per cent to 14 per cent in response to the surging inflation rate that hedged up to 18.60 per cent as of June 2022.

"We note the gloomy outlook of the global economy which has a direct link to our domestic economy with pass-through effects of imports.

“The persistent war in Ukraine and other disruptive factors may present as risks into the end of the year.

"A tightening of rates may have been a good decision by the MPC as that was necessary to tame the rising inflation rates in the past months.

"We however reiterate our earlier position that rate hikes or monetary policy instruments alone will not yield the desired result of lowering the inflation rate without a corresponding boost to the supply-side factors like FOREX scarcity, insecurity, rising costs of fuels, and weak infrastructural support for production.”

“While it is expedient to curb inflation rates, we equally risk a contracted economy that may go towards a recession.

"This calls for the need to embark on targeted financing for critical sectors of the economy to help boost the supply-side,” the statement added.

 

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