The Director-General of the Manufacturers Association of Nigeria, Mr. Segun Ajayi Kadir, has criticized the Central Bank of Nigeria’s recent decision to raise the monetary policy rate by 150 basis points.
Speaking at a press conference in Lagos on Thursday, Ajayi-Kadir warned that this increase will exacerbate the already high cost of doing business in the country.
Ajayi-Kadir explained that the CBN’s move to tighten monetary policy and raise loan costs will significantly elevate production expenses, limit access to funds, and reduce investment and competitiveness within the manufacturing sector.
He highlighted that the Monetary Policy Committee’s (MPC) recent decisions seem to prioritize the financial sector over the real economy, neglecting a balanced approach.
“This monetary stance will constrain investment and expansion, hindering manufacturers’ ability to invest in innovative technologies, expand production capacities, or explore new markets,” Ajayi-Kadir stated.
“The combination of increased borrowing costs and reduced liquidity will further restrict manufacturers’ capabilities in these areas.”
He emphasized that this policy could lead to delays or cancellations of planned initiatives, ultimately limiting the sector’s potential for growth and its contribution to the nation’s economic development.
Ajayi-Kadir also noted that the high lending rate, now exceeding 30%, will make Nigerian products less competitive in the global market.
While acknowledging the MPC’s efforts to address economic challenges such as inflation and exchange rate fluctuations, Ajayi-Kadir urged the committee to consider the broader impact on the real sector.
He called for collaboration with fiscal authorities to support the sector’s role in driving employment, productivity, foreign exchange earnings, and overall economic progress.
He also pointed out that nearly two years of raising the MPR have not yielded positive results and urged the CBN to explore alternative measures to address the underlying causes of inflation, primarily cost-push factors.
The MPC announced on Wednesday its decision to increase the benchmark interest rate by 150 basis points, from 24.75% to 26.25%.
This move continues the CBN’s hawkish monetary policy tightening since the beginning of the year, aimed at controlling inflation.
The CBN has defended the consistent MPR hikes over the last three MPC meetings as necessary to stabilize the exchange rate and moderate inflation, which stood at 33.69% as of April 2024.
