Stakeholders have reacted to the decisions of the MPC raised concerns over the 27.25 per cent increase in benchmark interest rate.
The director/CEO of Centre for the Promotion of Private Enterprise (CPPE), Dr. Muda Yusuf, stated that the CBN’s decision to tighten the monetary policy further is detrimental to investment and economic growth.
Yusuf said, “It is quite troubling that at a time when manufacturers, entrepreneurs, and other investors in the economy are craving a breath of fresh air, the CBN chose to tighten the noose on them by resorting to a further tightening of monetary policy.
“The latest policy choice of the apex bank is at variance with the mood of most economic players and the desire to promote economic recovery and growth. What manufacturers and other investors need at this time is some oxygen and stimulus, not policy measures that would worsen an already suffocating situation.
He explained that MPR at 27.25 per cent, CRR at 50 per cent, and the asymmetric corridor at +500 and -100 are very difficult monetary conditions for most businesses, given the prevailing macroeconomic and structural conditions.
He noted that “the second quarter GDP numbers showed clearly that the economy was still in a floundering mode as many critical sectors of the economy slowed. These include manufacturing and other subsectors of the industrial sector, such as cement, food and beverage, chemicals and pharmaceuticals, trade, ICT and real estate.
“The road transport, motor assembly, publishing and motion pictures sectors contracted during the quarter. The aviation, oil refining, textile, livestock and quarry and minerals sector were still in recession. Tightening financial conditions in the circumstances does not seem appropriate.
“The private sector should not be made to pay the price of liquidity growth, for which they were not responsible. Issues of excess liquidity should be addressed within a causative context. The injection of liquidity into the system is largely public-sector driven, as rightly noted by the CBN governor. Therefore, the focus of resolving it should be within that context. Stifling the financial conditions to address liquidity issues is detrimental to the investment and growth of the economy.
“The implications of the latest MPC decision for investors are quite concerning as cost funds would be further exacerbated, possibly well above 35 per cent or more. It is made worse by the increase in CRR to 50 per cent and retention of the asymmetric corridor of +500 and -100.
“We believe that the policy decisions of the CBN are most inappropriate for the prevailing economic conditions and the challenges faced by entrepreneurs in the country.
“The operating and production costs of businesses would be further exacerbated by the latest monetary policy tightening. The increase in CRR to 50 per cent would constrain financial intermediation with negative consequences for the banking system and the economy,” he said.
On his part, the president, Nigerian Association of Chambers of Commerce, Industry, Mines, and Agriculture (NACCIMA) Dele Kelvin Oye said the decision burdens businesses with higher loan costs, exacerbating their struggles and failing to curb inflation or stabilise the naira.
“We urge the CBN to engage with stakeholders for a collaborative approach, considering alternatives like targeted sector support, deficit reduction, and promoting local production.
“A reassessment of strategies is essential to ensure effective economic management and sustainable growth in Nigeria. Dialogue and innovative solutions are crucial for repositioning our economy.
“The increase is 50bps. It is not a material change. The narrative is actually the trend upwards. This confirms that the previous high interest rate has not worked.”
