Small business owners have expressed concerns over the Central Bank of Nigeria’s (CBN) recent decision to raise the Monetary Policy Rate (MPR) from 26.75% to 27.25%, describing it as “unfortunate” and detrimental to the business environment. The business community warns that the new rate could further contract businesses, leading to downsizing and job losses.
The CBN Governor, Mr. Olayemi Cardoso, announced the 50-basis point increase at the conclusion of the 154th Monetary Policy Committee (MPC) meeting in Abuja, with 11 out of the 12-member committee supporting the hike. The MPR, which serves as a benchmark for bank interest rates, was raised despite growing concerns about its potential impact on small and medium enterprises (SMEs).
The hike comes as the National Bureau of Statistics (NBS) revealed a rise in Nigeria’s unemployment rate to 5.3% year-on-year. Small business owners, alarmed by these figures, fear that the increase in borrowing costs will push many businesses to the brink.
Dr. Femi Egbesola, President of the Association of Small Business Owners of Nigeria (ASBON), expressed disappointment over the timing of the rate hike, stating that it could lead to further contraction in the economy.
“It’s unfortunate that this is coming again at a time when manufacturers and actors in the real sector are still grappling with the high cost of doing business,” said Egbesola.
He warned that the increase will raise the cost of goods and services, making it difficult for businesses to remain competitive.
“The manufacturing sector may contract more as fund liquidity and profitability will surely reduce,” he added.
Egbesola also noted the potential for increased bad debts, with many businesses likely to struggle to meet loan obligations, making banks hesitant to lend to the real sector. He predicted that this would lead to downsizing, reduced production capacities, and further economic contraction.
“Our competitiveness in the national, continental, and global business environment will be further challenged, as Made-in-Nigeria products will naturally become more expensive than before,” Egbesola concluded.