The Manufacturers Association of Nigeria (MAN) has decried the continuous hike in the benchmark interest rate by the Central Bank of Nigeria (CBN) over the past two years which has resulted in an increase of 1,475 basis points from 11.5% in May 2022 to 26.25% in May 2024, adding that additional increase by 50 basis points to 26.75% in July will further constrain the growth of the manufacturing sector.
Recall that CBN announced an increase in the Monetary Policy Rate (MPR) by 50 basis points from 26.25% to 26.75% at the end of its 296th meeting of the Monetary Policy Committee (MPC) on Tuesday, last week.
Director General of MAN, Segun Ajayi-Kadir, noted that despite the continuous rate hike, inflation has remained persistently high, reaching a 28-year high of 34.19% in June 2024.
His words: “In the face of the persistent rise in inflation majorly occasioned by continuous increase in energy and food prices, CBN has again increased the MPR by 50 basis points from 26.25% to 26.75%. The Monetary Policy Committee (MPC) widened the asymmetric corridor around the MPR from +100 to -300 basis points to +500 to -100 basis points. Additionally, the MPC decided to maintain the Cash Reserve Ratio (CRR) for deposit money banks at 45% and for merchant banks at 14% and retained the Liquidity Ratio at 30%.
“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% in May 2022 to 26.25% in May 2024, inflation has remained persistently high, reaching a staggering 34.19% 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.”
Ajayi-Kadir noted that high cost of borrowing remains one of the major challenges of the manufacturing sector, adding its continuous increase will escalate production costs and consequently the prices of finished goods, with consequential effect on unemployment and social instability; and stifle capacity to make new and further investments, innovation and curtail opportunities for growth.
“It will constrain the capacity of the sector to compete effectively in regional and global markets, and if unchecked, may trigger critical distress of more manufacturing concerns; constrain reinvestment for expansion and introduction of new brands; further restrain access to capital; and reduce the flow of investments into the sector,” he added.