By Lydia Bello
The Manufacturers Association of Nigeria (MAN) and the Lagos Chamber of Commerce and Industry (LCCI) on Wednesday expressed concern over the negative effect of continuous hike in the Monetary Policy Rate (MPR) in an elusive bid to tame the country’s inflation.
The organosations in separate press releases, expressed the agony their members are passing through because of the persistent hike in the MPR.
According to them, despite the continuous increase in MPR over the past two years resulting in a weighty 1,475 basis point hike from 11.5 percent in May 2022 to 26.25 percent in May 2024, inflation had remained persistently high, reaching a staggering 34.19 percent in June, the highest since March 1996.
Reacting to this latest development, Segun Ajayi-Kadir, Director General of MAN, said the new MPR would further “constrain the growth of the manufacturing sector, as the purchasing power of consumers, production levels, competitiveness and sales will face further decline.
“The manufacturing sector in Nigeria plays a vital role in the country’s economy. However, it faces many challenges that threaten its sustainability and contribution to economic growth.
“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 and further compound the prevailing low consumer demand, capacity utilization and profitability,” he said.
He added that high MPR would stifle capacity of businesses to make new and further investments, innovation and curtail growth opportunities and constrain the manufacturing sector’s capacity to compete effectively in regional and global markets, and if unchecked, may trigger critical distress of more manufacturing concerns.
He added: “It is noteworthy to state that the worrisome trend occasioned by increase in cost of borrowing is corroborated by the report of the National Bureau of Statistics (NBS), to the effect that manufacturing investment declined significantly in the second quarter of the year.
“This drop underscores the critical link between domestic investment confidence and foreign investor sentiment. In addition, the share of manufactured exports in non-oil exports also declined from 21.4 per cent in Q4 2023 to 15.1 percent in Q1 2024.”
He said that it was expedient that the survival of manufacturing in Nigeria was prioritised when making monetary policy decisions.
He added that this would enable the sector to effectively play its role as the key driver of employment creation, productivity, stable foreign exchange earnings, and economic sustained growth.
The MAN, therefore, recommended that the federal government should directs the Central Bank of Nigeria (CBN) to conduct a comprehensive assessment of the impact of previous decisions of the MPC on inflation rate and the productive sector over the last five years to provide information that would guide future MPC’s decisions.
It also implored the CBN to be domestic production-centric by detaining from continuous hike in MPR and allowing time for the real sector to recover from the impact of previous hikes.
The MAN also urged the government to take deliberate actions to “insulate the productive sector from the impact of continuous hike in MPR by expediting action on the disbursement of special provisions earmarked by government for the manufacturing sector.”
It said that the N75 billion single-digit loan approved by President Bola Tinubu over a year ago and the recently announced N1 trillion readily come to mind, urging the government to offer a fiscal support system that will enable the manufacturing sector to import raw materials, spares and machines that are not available locally at concessionary duty rate.
In addition, it demanded the minimization of pressure on foreign exchange reserves by incentivizing backward integration and local sourcing to decrease reliance on imported products and raw materials.
Speaking in the same vein, the Director General of LCCI, Dr. Chinyere Almona, said that the chamber noted with concern the recent decision by the CBN to raise the MPR.
Almona said: “The LCCI acknowledges the CBN’s efforts to control inflation and stabilise the economy. However, we are deeply concerned about the broader implications of this rate hike on the business community and the overall economic landscape.
“The LCCI urges the government and the CBN to consider a more balanced approach to monetary policy. While controlling inflation is crucial, mitigating adverse effects on business operations and economic growth is imperative.”
She proposed that CBN should diversify its approach to controlling inflation beyond interest rate hikes in favour of policies that directly address supply-side constraints, such as improving agricultural productivity and stabilising energy prices, can help reduce inflationary pressures more effectively.
She said: “Increased investment in infrastructure can alleviate production bottlenecks and reduce business costs. This will enhance productivity and competitiveness, helping to tame inflation from the supply side.’’
The LCCI said that it remained committed to working with the government and the CBN to ensure policies that foster conducive environment for business growth and economic stability.
“A holistic approach, balancing inflation control with support for businesses, will pave the way for sustainable economic development in Nigeria,” it said.
