The National President of the Nigerian Association of Chambers of Commerce, Industry, Mines, and Agriculture (NACCIMA), Dele Oye Esq., has enumerated the potential consequences of a hike in the benchmark interest rate (MPR) by the Central Bank of Nigeria (CBN) on Nigerian businesses.
In a statement, Oye said while an increase in the benchmark interest rate can help control inflation, it often introduces higher costs and increased uncertainty for businesses, which can have a range of negative impacts on their operations and growth prospects.
According to him, some of the consequences include increased borrowing costs, reduced investment, decreased consumer spending, impact on stock prices, cash flow challenges, inflation control, and long-term planning, among others.
The statement reads: “A hike in the benchmark interest rate (MPR) by the CBN can have several potential consequences for businesses, including: “Increased Borrowing Costs: Higher interest rates mean that loans and lines of credit become more expensive.
This can increase the cost of financing for businesses, leading to higher operational costs. “Reduced Investment: As borrowing becomes more expensive, businesses may delay or scale back on investments in expansion, new projects, or capital improvements.
This can slow down business growth and innovation. “Decreased Consumer Spending: Higher interest rates can lead to increased borrowing costs for consumers as well, which can reduce their disposable income.
This typically results in lower consumer spending, which can negatively impact businesses, particularly those in the retail and service sectors.