The Manufacturers Association of Nigeria (MAN), has lamented over the increment in the Monetary Policy Rate (MPR) as the hope for a single digit lending rate for productive sector is dashed.
Consequently, the committee increased the MPR by 150 base points to 15.5 per cent with an asymmetric corridor of +100/-700 basis points around the MPR; and Cash Reserve Requirement (CRR) by 750 base points to 32.5 er cent, while retaining Liquidity Ratio at 30 per cent.
Manufacturers noted that the increase in the two monetary parameters, MPR and CRR portends worrisome negative consequences for the manufacturing sector, as increased cost of borrowing by manufacturers, further beyond the extant double-digit rate, which disincentivise new investments in the sector; increased factor costs which feed into high product prices, making the sector uncompetitive; among others.
Director-general of MAN, Segun Ajayi-Kadir, said, in consideration of the prevailing scenario around increase in interest rate and access to funds, tougher times are ahead for the productive sector.
He emphasised that the increase in MPR from 14 per cent to 15.5 per cent will rub-off negatively on other rates and dash the hope for a single digit lending rate for the productive sector in the economy.
Ajayi-Kadir observed that continuous contractionary monetary policy posture without complimentary fiscal support may not effectively reduce the prevailing inflationary pressure on the economy, saying, this is not unconnected with the fact that the current increase in Consumer Price index as reported by NBS is not largely driven by monetary phenomenon, as self-inflicted weak foreign exchange rate management can be linked to the pressure.
He pointed out that, “an experiential x-ray of the prevailing economic stance revealed that domestic output gap due to the inefficiency of the macroeconomy, unguided industry development, inclement and high-cost operating environment, exploitative regulatory ecosystem and some externalities are predominantly responsible for the rising inflation that the nation is experiencing.”
MAN’s DG called for monetary authority to strategically set in motion mechanism for wholistic balancing of the real interest rate, which is critical to investment and not just following leading economies to adjust Interest rate without considering domestic peculiarities.
“Interest rate (MPR), Inflation and Exchange Rate are triadically critical to investment and production. Balancing the rates in line with local aspiration is therefore imperative. Regrettably, at the moment, other contributory factors like insecurity and externalities induced food shortage; Government’s excessive drive for internally generated revenue, increase in interest rate in the US; unsustainable and unpragmatic interventions in the forex market; the acute shortage of forex and unfriendly exchange rates are not only fueling inflation, but seriously depressing industrial production,” he said.
He hoped that the CBN will creatively go beyond the conventional monetary management system, recommending for upscale the current efforts at improving the availability of development-oriented funds at single digit interest rate, prioritizing industries.
“Promote a more robust production centric forex management and intervention in official forex market, leveraging on sustained increase in crude oil price in the global market; give priority attention to meeting forex requirement of the industries vital inputs that are not available locally, to sustain and ramp-up production; among others,” he recommended
