The Manufacturers Association of Nigeria (MAN) said the increase in Monetary Policy Rate (MPR) has widened the journey farther away from the preferred single-digit interest rate regime.
MAN in a statement signed by its Director-General, Segun Ajayi said, the recent increase in MPR is not manufacturing friendly considering the myriad of binding constraints already limiting the performance of the sector.
According to him, the association is therefore concerned about the ripple effects of this decision and its implications for the manufacturing sector that is visibly struggling to survive the numerous strangulating fiscal and monetary policy measures and reforms.
He said, manufacturers are hopeful that the stringent conditionalities for accessing available development funding windows with the CBN will be relaxed to improve the flow of long-term loans to the manufacturing sector at single-digit interest rates.
“The expectation is that MPC will ensure that future adjustments of MPR take into consideration the trend of core inflation rather than basing decisions on the headline and food inflation. This will no doubt shield the sector of the backlashes from the 13.5per cent MPR, ramp up production and guarantee sustained growth in the overall best interest of the economy.
In response to the domestic economic conditions in the first quarter of 2022 and other related challenges, especially those associated with the prevailing international financial and economic environment, MPC recently reviewed its previous decisions.
The Committee decided to deepen its contractionary monetary policy stance by increasing the Monetary Policy Rate (MPR) to 13.5per cent from 11.5per cent, which was fixed since September 2020.
This is another level of increase in interest rates on loanable funds, which will no doubt upscale the intensity of the crowding-out effect on the private sector businesses as firms have lesser access to funds in the credit market
It will spur an upward review of existing lending rates dependent on obligations of manufacturing concerns, which will drive costs Northward
Intensify demand crunch emanating from the heavily eroded disposable income of Nigerians, constrained access of households and individuals to cheap funds
Lead to the rising cost of manufacturing inputs, which will naturally translate to higher prices of goods, low sales, and an enormous volume of inventory of unsold products
Exacerbate the intensity of idle capital assets, worsen the already declining profit margin of private businesses and heighten the mortality rate of small businesses
Further, reduce capacity utilization, and upscale the rate of unemployment, incidences of crime, and insecurity as the capacity of banks to support production and economic growth is heavily constrained
Reduce the pace of full recovery of the real sector, make manufacturing performance remain lackluster and of course, lead to a leaner contribution to the Gross Domestic Product (GDP).
