The Manufacturers Association of Nigeria and the Nigerian Association of Chambers of Commerce, Industry, Mines, and Agriculture have warned the Central Bank of Nigeria that the recent increase in Monetary Policy Rate will trigger higher prices of products.
According to a statement signed by Segun Ajayi-Kadir, Director-General, MAN, the increase in the Monetary Policy Rate and the Cash Reserve Ratio will have a negative effect on the manufacturing sector.
The apex association of manufacturers also said that the recent development would lead to an increased cost of borrowing by manufacturers, further beyond the double-digit rate, which would disincentivise new investments in the sector.
The statement reads in part, “The observed continuous contractionary monetary policy posture without complementary fiscal support may not effectively reduce the prevailing inflationary pressure on the economy.
"This is not unconnected with the fact that the current increase in consumer price index as reported by NBS is not largely driven by the monetary phenomenon, as self-inflicted weak foreign exchange rate management can be linked to the pressure.”
According to MAN, the rate hike would cause increased factor costs which will lead to high product prices, making the sector uncompetitive.
The association also noted that the CBN’s decision to raise the benchmark borrowing rate would lead to attendant job losses, thereby exacerbating the nation’s already worrisome unemployment statistics.
“It is important that the monetary authority strategically set in motion mechanism for holistic balancing of the real interest rate, which is critical to investment and not just following leading economies to adjust Interest rate without considering domestic peculiarities.”
On its part, NACCIMA described the decision of the Monetary Policy Committee of the Central Bank of Nigeria as unidirectional and one that would negatively affect both businesses and individuals.
“The persistent increase in interest rates may not be sufficient to reduce the inflation rate.
"We feel that this is primarily a strategy to manage inflation and does not address the underlying cause of inflation, which is the rising food costs caused by several variables, including the devaluation of the Naira and the cost of energy, which has impacted production and transportation.”
According to NACCIMA, the survival of most small and medium-sized businesses was threatened by the rising costs of capital and production, resulting in an increase in the price of finished items.
The statement also noted that the rate hike would make it more challenging for businesses to repay their loans.
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