The Manufacturers Association of Nigeria (MAN) has reacted to the recent decision by the Central Bank’s Monetary Policy Committee (MPC) to increase the interest rate by 50 basis points stating that the continuous hike in MPR since May 2022 leads to an increase in production costs and finally prices of goods.
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% in May 2022 to 26.25% in May 2024 has been ineffective in taming inflation which soared to a 28year high of 34.19% 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.
It stated, “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.”
“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.”
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.
Backstory
The CBN this week increased the benchmark interest rate by 50 basis points to 26.75%- the fourth consecutive MPR hike in 2024 and resulting in an 800 basis points hike since February this year. Despite this, inflation has soared to 34.19% as of June 2024.
Since May 2022, the Central Bank’s Monetary Policy Committee has increased interest rate by a combined 1,525 basis points pushing benchmark MPR from 11.5% to 26.75% in July 2024. During this period, inflation has almost doubled from 17.71% in May 2022 to 34.19% in June 2024- marking an increase of 16.48%-points during the period.