CBN’s 26.75% interest rate will worsen purchasing power – MAN
The Manufacturers Association of Nigeria (MAN) has reacted to the new Monetary Policy Rate (MPR) which benchmarks interest rates to 26.75 per cent from 26.25 per cent, saying it will further constrain the growth of the manufacturing sector. The Monetary Policy Committee of the Central Bank of Nigeria (CBN) announced the new rate at the […]
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The Manufacturers Association of Nigeria (MAN) has reacted to the new Monetary Policy Rate (MPR) which benchmarks interest rates to 26.75 per cent from 26.25 per cent, saying it will further constrain the growth of the manufacturing sector.
The Monetary Policy Committee of the Central Bank of Nigeria (CBN) announced the new rate at the end of its 296th meeting in Abuja.
Reacting in a statement on the increase on Wednesday, the Director General of MAN, Segun Ajayi-Kadir, said, “The new rate will further constrain the growth of the manufacturing sector, as the purchasing power of consumers, production levels, competitiveness and sales will face further decline.”
The body expressed concern that, “Despite the continuous increase in MPR over the past two years resulting in a weighty 1,475 basis point hike from 11.5% in May 2022 to 26.25% in May 2024, inflation has remained persistently high, reaching a staggering 34.19% in June, the highest since March 1996.”
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The DG said the continued increase in the cost of borrowing, which is one of the major challenges, will escalate production costs and consequently the prices of finished goods.
He added that the development will constrain reinvestment for expansion and introduction of new brands, further restrain access to capital, judging from the fact that only 16% of total commercial bank credit was disbursed to the manufacturing sector in the first quarter of the year.
“It is noteworthy to state that the worrisome trend occasioned by increase in cost of borrowing is corroborated by the report of NBS, to the effect that manufacturing investment declined significantly in the second quarter of the year.”
The body therefore called on the federal government to direct the CBN to conduct a comprehensive assessment of the impact of previous decisions of the MPC on inflation rate and the productive sector over the last 5 years.