Onwubuke Melvin
The National President, of the Nigerian Association of Chambers of Commerce, Industry, Mines and Agriculture, Dele Oye, said the group was deeply concerned with how the apex bank had continued to raise interest rates.
This follows the hike in Nigeria’s Monetary Policy Rate, also known as the interest rate, from 22.75 per cent to 24.75 per cent by the Central Bank of Nigeria on Tuesday.
He said, “The NACCIMA, representing the collective voice of Nigerian businesses across commercial, industrial, and agricultural sectors, is deeply concerned by the central bank’s approach to curbing inflation and managing excess liquidity through broad-based policy tools that inadvertently impose constraints on the private sector’s ability to access affordable credit.
“Our position, as detailed in our previous communication (Ref: NACC/NP22/23/1249 dated March 13, 2024), remains that the focus of the CBN’s policies should be recalibrated towards addressing the excess liquidity primarily stemming from the public sector’s borrowing habits and expenditure.
“The private sector, which has been effectively sidelined in the bank lending market due to the crowding-out effect, now faces even more severe repercussions.”
Oye pointed out that the recent increases in interest rates, aimed at controlling inflation, were likely to have a number of negative consequences.
He stated them to include an increase in the cost of borrowing, adding that “existing loans will incur higher interest rates, raising the cost of capital for businesses. This scenario discourages entrepreneurial activities and expansion plans, which are vital for economic growth and job creation”.
Oye explained, “Restricted credit availability: With the increase in the CRR, banks’ ability to lend is further curtailed. This exacerbates the challenges faced by the private sector, which is already grappling with limited access to finance.
“Pass-through effects on inflation: As businesses incur higher interest costs, they are left with no option but to pass these costs on to consumers through increased prices for goods and services, which can contribute to inflation rather than curb it.
“Stifling economic growth: Tightened monetary conditions may lead to a reduction in investment and consumption, which are essential drivers of economic growth. This could potentially stifle the economic recovery and dampen the prospects for prosperity.”
He opined that the CBN should follow a more meticulous and targeted approach, focusing on mechanisms that particularly address liquidity issues in the public sector without inflicting undue burden on the private sector.
“Additionally, policy directions should be clear and communicated on a quarterly basis, with a robust stakeholder engagement strategy to ensure that the views and concerns of the private sector are considered in policy formulation.
“In summary, while NACCIMA acknowledges the CBN’s mandate to maintain price stability, we urge a re-evaluation of the current policy measures to foster a more conducive environment for private sector-led economic growth.
“We remain committed to engaging with the CBN and the Ministry of Finance to find sustainable solutions that will ensure the economic well-being and prosperity of all Nigerians,” he noted.
Meanwhile, in his remark, the Director-General of NACCIMA, Sola Obadimu, stated that the hike in MPR had put a strain on the inventory of businesses.
“Goods can no longer go out because people are buying less. Inventories are building up and there is nothing anybody can do. A distributor can’t take stock from you when the ones he has taken have not been bought.
“This move would naturally increase the cost of doing business and if the cost of doing business is increased because you can’t sell below your production cost, your stock would move slower and then your inventory will grow. Consumers are overwhelmed; they don’t have money to buy things anymore.
“Their wages are declining daily because there are other charges like the cost of utility and others. So, it is going to have an adverse effect on the real sector,” Obadimu noted.
