The new interest rate announced by the Central Bank of Nigeria (CBN) will not bode well for the economy, the organised private sector has said.
It may be recalled that the Monetary Policy Committee (MPC) of the CBN, on Tuesday raised the Monetary Policy Rate (MPR), the benchmark interest rate by 50 basis points to 27.25 percent from 26.75 percent in response to the continued inflationary conditions in the economy.
This was the fifth consecutive hike in interest rate, having been raised by 8.5 percent under the current leadership of the apex bank.
The outcome of the MPC meeting beat analysts’ expectations that the committee would at least hold policy rates at current levels in response to the economic hardship faced by Nigerians.
In a monitored television interview by the President and Chairman of the Council of the Lagos Chamber of Commerce and Industry (LCCI), Mr. Gabriel Idahosa, expressed angst over the new interest rate, saying that the expectation was that the CBN would hold the rate.
According to him, the increase certainly will have a rippled negative effect on the economy.
Also the Manufacturers Association of Nigeria (MAN) has issued a strong warning about the negative implications of the recent increase in the Monetary Policy Rate (MPR) to 27.25 percent.
In a statement by Segun Ajayi-Kadir, the Director General of MAN, he expressed concerns about the far-reaching impact of this decision on the manufacturing sector.
Ajayi-Kadir highlighted that the continued rise in interest rates, which now totals 15.75 percentage points since May 2022, would exacerbate the challenges faced by manufacturers. The sector is already grappling with rising production costs, declining consumer purchasing power, and a challenging operating environment.
Ajayi-Kadir said, “The decision to raise the MPR to 27.25 per cent has far-reaching implications for the manufacturing sector in Nigeria. The continued increase in interest rates, which now totals 15.75 percentage points since May 2022, would compound the challenges faced by the sector, including rising production costs in the face of declining consumer purchasing power.
“With the increase in borrowing costs, manufacturers will now pay over 35% on their credit facilities. Clearly, this will lead to an increase in production costs, higher prices of finished goods, lower competitiveness and production capacity expansion.”
The increase in borrowing costs will have a direct impact on manufacturers, forcing them to pay over 35 percent on their credit facilities. This will inevitably lead to higher production costs, which will be passed on to consumers in the form of increased prices for finished goods. As a result, Nigerian manufacturers will face reduced competitiveness in both domestic and international markets.
