The Nigerian Association of Chambers of Commerce, Industry, Mines and Agriculture (NACCIMA) has described the Monetary Policy Committee( MPC) of the Central Bank of Nigeria, (CBN) decision of raising interest rate as unidirectional, saying the move would negatively affect businesses and individuals.
NACCIMA made this known while reacting to the increase of interest rate by the MPC of the Apex bank.
“The raising Of Interest Rate From 14% to 15.5% by CBN’s Monetary Policy Committee, MPC, is unexpected, non-supposing time and one directional”, Said NACCIMA DG, Olushola Obadimu.
“It is never the best policy to contemplate in the current economic situation as it is evident that there are other causes of the stunning levels of inflation. The encouraging approach to reduce the current rate of inflation is to conduct a comprehensive analysis of all the causes contributing to the inflation’s rising trend and to implement control measures that can halt their effects. It has never been more important than it is now for multi-sector, intergovernmental agencies/ministries, and the organised private sector of Nigeria to have their technical submissions regarding the likely future course of action considered”, he stated.
The impact of the Monetary Policy Rate on industries, particularly the manufacturing sector, according to him is unquestionably considerable. Notably, the manufacturing industry already faces several obstacles, including high exchange rates, forex scarcity, currency depreciation, the cost of diesel, and insecurity.
“Considering not only the interest rate, but also the concurrent introduction of the increase of Cash Reserve Ratio from 22.5% to 32.5%, banks will be dissuaded from lending money or may explore mergers to meet the effects of CRR and MPR. All these variables may contribute to a decline in the business viability, which will have a negative impact on the economy”, noted the DG.
“Increase in MPR can be devastating if too much is done too quickly, as in the instance of Nigeria, which implemented three significant rate hikes within five months. It is conceivable that this hike in Policy rates is insufficient to contain inflation. Therefore, it is essential for Nigeria to tread carefully down this path of business closures, rising inflation, high unemployment, and slow/stagnant economic growth”, he maintained.
“In conjunction with the Central Bank of Nigeria, the Federal Government must ensure that the Nigerian economy shifts from a consumption-based to a production-based economy. For economic growth and development, the government must attempt to revitalise the industry. This will help to attract foreign direct investment, create jobs, and ensure a fair distribution of income and wealth”, he stressed.
“It is our hope that more financial institutions will be promoted to facilitate the availability of funds for industries, particularly the manufacturing sector, and that the interest rate will be lowered to encourage private investors and entrepreneurs to engage in investment that will boost Nigeria’s economic growth”, he added.