The Director-General of the Lagos Chamber of Commerce and Industry (LCCI), Dr Chinyere Almona, has expressed grave concern over the Central Bank of Nigeria’s (CBN) decision to increase the monetary policy rate (MPR) to 22.75 per cent, signaling a significant shift in monetary policy.
She noted that while the CBN intends to control inflation, this is the fifth consecutive hike in a row, raising serious concerns about its effectiveness in tackling the high food inflation and the likely impact on businesses and economic growth.
The CBN on Tuesday raised the benchmark-lending rate by 400 basis points to 22.75 per cent in what has been described as an aggressive monetary tightening. This is coming at a crucial time for the nation’s economy which is facing challenges such as elevated inflation, commodity price hikes, the FX crisis, and rising cost of production.
Almona said that curbing the current rising inflation requires an effective combination of both fiscal and monetary policies to achieve a meaningful result. According to recent data from the Nigerian Bureau of Statistics (NBS), the headline inflation rate for January 2024 rose to 29.90 per cent, compared to 28.92 per cent in December 2023.
“The year-on-year increase is notable, with a rise of 8.08 per cent points from January 2023. We cannot say the hikes in rates have had any significant impact on curbing inflation in Nigeria, especially in recent months. The Chamber’s view on the current fight against inflation is that the monetary and fiscal authorities should focus on the factors driving the inflation rates by tackling the supply-side deficiencies instead of focusing too much attention on the demand-side management.
“We urge the CBN to continue with its FX market reforms to a conclusive end, as the high exchange rate against the Naira is a major culprit in the skyrocketing inflation rates. On the fiscal side, the government needs to subsidise some productive sectors like agriculture, transport, and healthcare while keeping a stern eye on enhancing the country’s security profile. Other areas of intervention could be the adoption of a cheaper duty rate for the importation of agricultural inputs for local manufacturing and investment in building agro-industrial hubs across the country,” Almona stated.
She urged the government to make credit available to MSMEs to support their operations and production lines, saying concessionary rates, lower than the CBN prevailing MPR, are needed for MSMEs.
The DG said high lending rates make it challenging for businesses to access credit, especially for SMEs that are the backbone of the economy and the constant increase in production costs could lead to higher prices for goods and services, potentially affecting the competitiveness of Nigerian products in Africa and global markets respectively.
