The Manufacturers Association of Nigeria (MAN) and the Lagos Chamber of
Commerce and Industry (LCCI) have cried out that the recent increase of the
Monetary Policy Rate (MPR) by the Central Bank of Nigeria (CBN) on Wednesday from 18 per cent to 18.5 per cent would compound the threat of imminent recession starring the manufacturing sector in the face and lower the country’s GDP’s growth rate.
The Director General of MAN, Mr. Segun Ajayi-Kadir, made the above submissions last week in a press statement titled the “Implication of the Decisions of the Monetary Policy Committee of the CBN on the Manufacturing Sector,” which stated that the hike in the MPR would increase the cost of borrowing and further discourage investments in the manufacturing sector.
Ajayi-Kadir said: “The increase in MPR from 18 per cent to 18.5 per cent will certainly lead to an increase in lending rates and worsen the competitiveness of the manufacturing sector.
“The association has been clamoring for single-digit lending rates to allow manufacturers to access needed funds to boost the performance of the sector.
“This increase, like the previous ones, is evidence that the CBN is either
unperturbed about the plight of the productive sector or is unable to fathom out
a more creative policy mix that would reflate the sector.
“We are persuaded that monetary authority is oblivious of the fact that the failure
of its tightening policy to address the inflationary pressure is because the hike in inflation is largely caused by a combination of familiar challenges, including low output that is attributed to instability of macroeconomic variables, inconsistent and lackluster fiscal policy regime, incoherent industrial policies, challenging and expensive operating environment, exploitative regulation, external shocks and poor exchange rate management.”
The MAN, therefore, underscored the need to address the identified root causes of inflation and refrain from intensifying policy choices that hamper the performance of the real sectors of the economy.
He further highlighted that the increase would also lead to high cost of production, which would lead to higher commodity prices and inventory of unsold manufactured products.
The hike, according to him, would also cause a decline in capacity utilisation, reduce the output of the manufacturing sector, lessen manufacturing employment and brought about a decline in government revenue as a result of low productivity of the manufacturing sector and the resulting low taxes.
He added that it would also bring about reduction in inflow of investment owing
to increase in cost of borrowing for manufacturing investment and induce high
product prices owing to rising factor costs, which will in turn render the sector less uncompetitive.
The MAN averred that understanding the interrelationship among macroeconomic variables is essential in policy formulation, as the movements of interest rate, inflation rate and exchange rate have direct impact on investment, employment and output of any economy.