Manufacturers have urged the CBN to reconsider its approach to controlling inflation, warning that rising borrowing costs affect economic stability.
The Manufacturers Association of Nigeria (MAN) and the Lagos Chamber of Commerce and Industry (LCCI), during the week, 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.
In separate press releases, the MAN and the LCCI stated that despite the continuous increase in MPR over the past two years resulting in a weighty 1,475 basis point hike from 11.5 per cent in May 2022 to 26.25 per cent in May 2024, inflation had remained persistently high, reaching a staggering 34.19 per cent in June, the highest since March 1996.
According to the Director General of MAN, Mr. Segun Ajayi-Kadir, 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 is facing multitude of 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 utilisation and profitability,” he said.
Ajayi-Kadir added that high MPR would stifle capacity of businesses to make new and further investments, innovation and curtail opportunities for the growth and constrain the capacity of the manufacturing sector 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”.
