The Director-General of the Manufacturers Association of Nigeria (MAN), Mr. Segun Ajayi Kadir, has stated that the recent 150 basis points increase in monetary policy rate (MPR) by the Central Bank of Nigeria (CBN) will further compound the already high cost of doing business in the country.
Ajayi-Kadir stated on Thursday in Lagos at a press conference that further tightening and increasing loan costs would raise production expenses, limit fund accessibility, and reduce investment and competitiveness in the manufacturing sector.
He also noted that recent decisions by the Monetary Policy Committee (MPC) would further exacerbate the sector’s challenges.
According to the MAN Director General, the MPC seems to prioritize the financial sector over the real sector, rather than seeking a balanced approach.
He indicated that this monetary stance will constrain investment and expansion, hindering manufacturers’ ability to invest in innovative technologies, expand production capacities, or explore new markets. The combination of increased borrowing costs and reduced liquidity will further restrict manufacturers’ capabilities in these areas.
He said, “As a result, this could lead to delays or cancellations of planned initiatives, ultimately constraining the sector’s potential for growth and its overall contribution to economic growth and development.
“The decision by the MPC will further compound the already high cost of doing business, consequently diminishing the competitiveness of Nigerian products in the global market.
“The high lending rate exceeding 30% will increase the cost of borrowing and make Nigeria’s goods less competitive to products from other nations.”
Consistent increase in MPR has not yielded positive results
Ajayi-Kadir acknowledged the MPC’s efforts in addressing the country’s economic challenges, such as inflation and exchange rate fluctuations. However, he urged the committee to consider the impact on the real sector and its broader effects on the nation.
He emphasized that collaboration with fiscal authorities is essential to bolster the sector’s traditional role in driving significant employment, productivity, foreign exchange earnings, and overall economic progress.
Ajayi-Kadir also noted that raising the MPR for nearly two years has not yielded positive results. Therefore, he urged the CBN to explore alternative measures to address the underlying causes of inflation, primarily focusing on cost-push factors.
Backstory
The MPC, on Wednesday, announced the decision to further increase the benchmark interest rate by 150 basis points from 24.75% to 26.25%. The decision follows hawkish monetary policy tightening by the apex bank since the beginning of the year in a bid to rein in inflation.
- The CBN has defended the consistent jumbo hike in MPR over the last three MPC meetings as part of measures to stabilise the exchange rate and moderate inflation which currently stands at 33.69% as of April 2024.
