Victor EzejaThe Nigerian Association of Chambers of Commerce, Industry, Mines and Agriculture (NACCIMA) has warned that the latest hike of the Monetary Policy rate ( MPR) to 24.75% by the Central Bank of Nigeria (CBN) would have a significant negative impact on private sector operations in the country.
The CBN governor, Olayemi Cardoso, had on Tuesday announced that during the 294th Monetary Policy Committee (MPC), the members voted to raise the MPR which is the benchmark interest rate by 200 basis points to 24.75 per cent from 22.75 per cent previously.
He said the consideration of the MPC members was on how to tame the surging tide of inflation in the country, especially as the data published recently by the National Bureau of Statistics (NBS) showed an increase to 31.7 per cent in February from 29.9 percent, after the Committee’s previous MPR hike to 22.75 per cent.
NACCIMA national president, Dele Oye, said in a statement Tuesday that the MPR hike will have severe repercussions on private businesses in the country.
He recalled that the association had written a letter to the CBN when the MPR was increased by 400 basis points to 22.75 per cent from 18.75 per cent, warning about the impact on private sector.
Oye reiterated NACCIMA’s position that the private sector has been excluded from the apex bank’s decision-making process.
Additionally, he expressed concerns that businesses could raise their pricing for goods and services to make up for the higher borrowing costs, which could unintentionally lead to inflation.
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The president highlighted four key issues the association has with the apex bank’s rate hike in a formal statement, saying:
Increase in the Cost of Borrowing: 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.
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.
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.
Meanwhile, the association advised the CBN governor to aim for a refined and focused strategy that directly tackles liquidity challenges in the public sector, while minimizing the strain on the private sector.
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NACCIMA recommended that the governor of the CBN pursue a more targeted and focused approach that directly addresses the public sector’s liquidity issues while reducing the burden on the private sector.
The president stressed the necessity of having a robust stakeholder engagement approach that ensures the private sector’s participation in policy formulation and of having clear policy directives announced on a quarterly basis.
“Our recommendation is that the CBN should pursue a more nuanced and targeted approach, focusing on mechanisms that specifically address the liquidity issues in the public sector without placing 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,” NACCIMA said.
Victor Ezeja is a passionate journalist with six years of experience writing on economy, politics and energy. He holds a Masters degree in Mass Communication.
