By Adedapo Adesanya
The Manufacturers Association of Nigeria (MAN) has reacted to the latest increase in the benchmark interest rate by 50 basis points by the Central Bank of Nigeria (CBN).
The group warned that any further hike in the interest rate would lead to a rise in production costs and prices of goods, thereby constraining growth.
The association stated that the continuous hike in the Monetarry Policy Rate (MPR) since May 2022 by the central bank’s Monetary Policy Committee (MPC) has impacted its operations.
Recall that the CBN on Tuesday increased the benchmark interest rate by 50 basis points to 26.75 per cent, the fourth consecutive MPR hike in 2024 and resulting in an 800 basis points hike since February this year.
In a statement signed by its Director-General, Mr Segun Ajayi-Kadir, MAN noted that the 1,475 basis points increase in interest rates from 11.5 per cent in May 2022 to 26.25 per in May 2024 has been ineffective in taming inflation which soared to 28-year high of 34.19 per cent in June 2024.
It explained that this recent increase in interest rates will further increase production costs, reduce consumer purchasing power as well as reduce competitiveness and sales.
“MAN notes with concern that, despite the continuous increase in MPR over the past two years resulting in a weighty 1,475 basis point hike from 11.5 per cent in May 2022 to 26.25 per cent in May 2024, inflation has remained persistently high, reaching a staggering 34.19 per cent in June, the highest since March 1996.
“Clearly, the new rate will further constrain the growth of the manufacturing sector, as the purchasing power of consumers, production levels, competitiveness and sales will face further decline.
“Therefore, the continued increase in the cost of borrowing, which is one of our major challenges, will:
“Escalate production costs and consequently the prices of finished goods, with consequential effect on unemployment and social instability. It will further compound the prevailing low consumer demand, capacity utilization and profitability,” the DG stated.
Furthermore, MAN noted that the hike will reduce the competitive advantage of Nigerian manufacturers in global and regional markets, further restrain access to capital, stifle new investment and expansion etc.
MAN, also called for better collaboration between the apex bank and the Ministry of Finance, requested the CBN to assess the impact of the previous hike on inflation, and asked the federal government to insulate the private sector from these hikes by quickly disbursing the promised N75 billion single digit loan and the N1 trillion as promised by President Tinubu.
