* CBN: $1.5bn attracted into economy on back of monetary tightening regime
James Emejo in Abuja and Dike Onwuamaeze in Lagos
The Manufacturers Association of Nigeria (MAN) has stated that the latest decisions of the Monetary Policy Committee (MPC), which increased Monetary Policy Rate (MPR) to 24.75 per cent would further worsen access to credit and cause a decline in the competitiveness of the Nigerian manufacturing sector.
Director General of MAN, Mr. Segun Ajayi-Kadir, disclosed this in a statement titled “Position of Manufacturers Association of Nigeria on the Report of Monetary Policy Committee Meeting held this week.”
The manufacturers stated this just as the CBN yesterday, disclosed that the economy attracted over $1.5 billion due to its monetary tightening stance. The apex bank disclosed this in a statement issued by its acting Director, Corporate Communications Department, Mrs. Hakama Sidi Ali.
The MPC decided to raise the MPR by 200 basis points to 24.75 per cent from 22.75 per cent; adjust the asymmetric corridor around the MPR to +100/-300 basis points; retain the Cash Reserve Ratio (CRR) of deposit money banks at 45.0 per cent; adjust the Cash Reserve Ratio of merchant banks from 10.0 per cent to 14.0 per cent and retain the liquidity ratio at 30.0 percent.
But, Ajayi-Kadir said, “the higher cost of doing business will be further exacerbated by the decision of MPC, thereby worsening competitiveness of Nigerian products in the global market, which is evident in the drastic reduction in global demand for these products.”
He added: “Data provided by the World Trade Organisation, revealed that South African manufacturing export value was $46 billion, while that of Nigeria was $3 billion in 2022.
“Clearly, this is over 15 times greater than Nigeria’s manufacturing export value in that year.
“The reduction in global demand for Nigerian products was further buttressed by NBS report that confirmed that manufacturing export value of Nigeria plummeted by 166 per cent from N2.07 trillion in 2019 to N778.44 billion in 2023.”
He added that the exorbitant lending rate of over 30 per cent has contributed largely to a drop in the share of manufacturing export to non-oil export from 82.4 per cent to 24.8 per cent in 2019 and 2023 respectively.
The MAN pointed out that the resultant increase in the cost of servicing loans is a threat to the financial stability of manufacturing companies.
It said: “The increase will destabilise manufacturers through the disruption of production plans, avoidable stock-out situations, and decreased capacity utilisation.
“Clearly, all of these could lead to downsizing of workers, closure of more companies, upscaling of social vices and insecurity in Nigeria.”
The manufacturers also noted that “the increase in merchant banks’ CRR and the narrowing of the asymmetric corridor will further reduce the capacity of banks to lend to the productive sector, such as manufacturing.
“These, in addition to the high interest rates, will limit backward integration, research and development and innovation needed to enhance productivity and rapid industrial-led economic growth.”
The MAN acknowledged that it recognises the rationale behind the MPC’s decision, but added that it is essential for the committee to carefully consider the potential impact of the decisions on manufacturing and collaborate with fiscal authorities to support the sector to play its traditional role as a critical driver of meaningful employment, improved productivity, steady forex proceeds inflow and sustained economic growth.
“It is worth noting that this approach of increasing the MPR has been adopted for almost two years without positive result. The association expected the new CBN’s administration to consider other measures to combat the pressure, particularly addressing the causes of the increase which are majorly cost-push factors.
“MAN urges the MPC to carefully consider the impact of these monetary policy measures on the manufacturing sector and the broader economy.
“It is crucial to strike a balance between addressing macroeconomic challenges and supporting the growth and sustainability of the manufacturing industry,” MAN said.
In the light of the afore mentioned, MAN recommended a robust synergy between the monetary and fiscal authorities as well as the consideration of the following policy measures.
“Ensure adequate security in farming areas and business environment by fast-tracking the passage of the Police Reform Bill and investing significantly in data platforms, surveillance systems and community policing.
“Stabilise the value of the naira by managing the floating exchange rate within a business-friendly threshold and intensify ongoing reforms to boost the level of liquidity and degree of transparency in the official forex window.
“Prioritise forex and credit allocation to the manufacturers and fast track the proposed recapitalisation of the banking sector.
“Further reduce the reliance of the country on imported products and raw materials by providing incentives for investment in backward integration and local sourcing to reduce the pressure on the dollar to the barest minimum.
“Prioritise the provision of infrastructure in industrial hubs and boost nationwide investment in renewables to reduce logistics cost and promote competitiveness,” MAN said.
CBN: $1.5bn Attracted into Economy on Back of Monetary Tightening Regime
Meanwhile, the CBN has disclosed that the economy attracted over $1.5 billion due to the bank’s monetary tightening stance which has continued to be appreciated by foreign investors.
The apex bank, in a statement issued by Ali, stated that available data indicated that the inflows resulted from the bank’s concerted effort to stabilise the foreign exchange (FX) market.
Ali said the Naira has also continued to record gains in the
Autonomous Foreign Exchange market traded at N1,309/$1 as against N1,611/$1 in the second week of March 2024.
She pointed out that Thursday’s rate signified that the local currency was headed in the right direction, assuring that the Cardoso-led central bank would remain committed to ensuring the stability of the market and the appropriate pricing of the Naira against other major currencies worldwide.
