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.