Raising monetary rate not friendly for manufacturers – MAN

The Manufacturing Association of Nigeria (MAN) has said that the recent increase in Monetary Policy Rate (MPR) from 11.5 per cent to 13.5 per cent is not manufacturing friendly considering the myriad of binding constraints already limiting the performance of the sector. It said the increase has widened the journey farther, away from the preferred […]

The Manufacturing Association of Nigeria (MAN) has said that the recent increase in Monetary Policy Rate (MPR) from 11.5 per cent to 13.5 per cent is not manufacturing friendly considering the myriad of binding constraints already limiting the performance of the sector.

It said the increase has widened the journey farther, away from the preferred single digit interest rate regime.

The Monetary Policy Committee (MPC) of the Central Bank of Nigeria (CBN) had in response to the domestic economic conditions in Q1 2022 and other related challenges, raised the MPR to 13.5% from 11.5% which was fixed in September 2020.

Commenting on the ripple effects of the decision, the Director General of MAN, Mr Segun Ajayi-Kadir, said: “It will also exacerbate the intensity of idle capital assets, worsen the already declining profit margin of private businesses, and heighten the mortality rate of small businesses while it will further reduce capacity utilization, upscale the rate of unemployment, incidences of crime and insecurity as the capacity of banks to support production and economic growth is heavily constrained.”

Ajayi-Kadir was however hopeful that CBN will also relax access to development funds to improve the flow of long-term loans to the manufacturing sector at single digit interest rate.

He said, “The expectation is that MPC will ensure that future adjustments of MPR takes into consideration the trend of core inflation rather than basing the decision on headline and food inflation. 

“This will no doubt shield the sector of the backlashes from the 13.5% MPR, ramp up production and guarantee sustained growth in the overall best interest of the economy,” he said.