Experts and stakeholders have said that the new Central Bank of Nigeria, CBN, interest rate of 27.25% is not good for the investment climate and economic growth of the country.
Experts and stakeholders have said that the new Central Bank of Nigeria, CBN, interest rate of 27.25% is not good for the investment climate and economic growth of the country.
Recall that the CBN announced another increase in its Monetary Policy Rate, MPR, raising it to 27.25%.
The decision was made on Tuesday during the Monetary Policy Committee, MPC, meeting chaired by CBN Governor, Yemi Cardoso.
Cardoso noted that the move will help improve confidence, which will enable economic agents to plan in the medium to long term. Read the full story HERE.
Experts’ opinion
In his reaction to the increase in MPR, Chief Executive Officer of the Centre for the Promotion of Private Enterprise, CPPE, Dr Muda Yusuf, said it is detrimental to investment and economic growth.
He stated: “It is quite troubling that at a time when manufacturers, entrepreneurs and other investors in the economy are craving for 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.”
May lead to further contraction of businesses – ASBON
Reacting, President of the Association of Small Business Owners of Nigeria, ASBON, Dr Femi Egbesola, said the move will lead further contraction in the real sector of the economy.
His words: “It’s unfortunate that this is coming again at this time, when manufacturers and actors in the real sector are still grappling with high cost of doing business amongst many other challenges.
“This definitely will push up further, cost of doing business and ultimately, cost of goods and services.
“Manufacturing sector may contract more as fund liquidity and profitability will surely reduce.
“The banks or financial institutions may witness more bad debts as many lenders may find it difficult to live up to their loan obligations. This will result to banks being averse to lending to the real sector.
“The economy may likely contract further, forcing the actors in the real sector to downsize their production capacities, human resources, expenditure and further exposure to loans.
“We may begin to see more ailing or comatose businesses.
“Our competitiveness in the national, continental and global business will be further challenged as Made-in-Nigeria products will be naturally more expensive than before, amongst others.”
Burdens businesses with higher loan costs – NACCIMA President
Also reacting, President of Nigerian Association of Chambers of Commerce Industry, Mines and Agriculture, NACCIMA, Otunba Dele Oye, the move further increases the cost of funds.
“As President of NACCIMA, I express concern over the CBN’s recent monetary policy rate hike to 27.25%.
“This decision burdens businesses with higher loan costs, exacerbating their struggles and failing to curb inflation or stabilize 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,” he stated.
Prof Uwaleke
Reacting to the increase in MPR , Prof Uche Uwaleke, President, the Association of Capital Market Academics of Nigeria, ACMAN, said: “My take on the recent hike in MPR is that in matters like this, the CBN usually has information that may not be at the disposal of the public.
“I want to believe the members of MPC mean well for the economy and have taken the decision to further tighten monetary policy based on strong evidence of major threats to exchange rate and inflation.
“All said, the task of taming inflation must be jointly tackled by both the monetary and fiscal authorities.
“So, the government has to play its part by controlling recurrent spending and focusing on productivity including through ramping up assistance to small businesses.”
