As the Central Bank of Nigeria (CBN)’s Monetary Policy Committee (MPC) increased the Monetary Policy Rate (MPR) by 150 basis points yesterday, from 24.75 per cent in March to 26.25 per cent, the Organised Private Sector (OPS) has said the committee has imposed more burdens on investors. The group called for a pause on the rate hikes as it has been hurting output and real sector investments in the country.
Specifically, the OPS said that it was shocked over the further increase, describing it as an aggressive regulatory intervention that is coming at a crucial time Nigerian economy was facing challenges such as elevated inflation, commodity price hikes, foreign exchange crisis, and rising cost of production.
Speaking in an interview with New Telegraph, the Chief Executive Officer of Centre for the Promotion of Private Enterprise (CPPE), Dr. Muda Yusuf, said that it was a pity to see yet a further tightening of monetary conditions in the economy by the CBN. Yusuf said: “My prayer was for the MPC to pause the rate hikes for a number of reasons. First, previous rate hikes have been quite aggressive, hurting output and real sector investments.
“Most economic operators with credit exposures to the banks have not recovered from previous hikes. Interest rates were already around 30 per cent threshold. “Secondly, extant CRR of 45 per cent has profound liquidity effects on the financial system. Both measures have dampening effects on financial intermediation, which is the primary role of banks in an economy.
“Thirdly, the monetary policy transmission channels are still very weak, given the level of financial inclusion in the economy. This limits the prospects of monetary policy effective ness.” Also speaking on the outcome, the Director-General of Lagos Chamber of Commerce and Industry (LCCI), Dr. Chinyere Almona, stated that the chamber was aware of the CBN intention to control inflation, but the decision, particularly the sixth consecutive hike, raises concerns about its effectiveness in tackling the rising food inflation and the likely impact on businesses and economic growth.
According to her, the CBN has increased the Monetary Policy Rate (MPR) from 24.75 per cent in March to 26.25 per cent, signaling a significant shift in monetary policy. Almona noted that curbing the inflation clearly required an effective combination of both fiscal and monetary policies to achieve a meaningful result.
She stressed: “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 supplyside deficiencies instead of focusing too much attention on the demand-side management.