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CBN’s 26.25% interest rate will increase high cost of doing business in Nigeria – MAN

CBN’s 26.25% interest rate will increase high cost of doing business in Nigeria – MAN

Managing Director of MAN, Segun Ajayi-Kadir

The Director General of the Manufacturers Association of Nigeria (MAN), Mr. Segun Ajayi Kadir, has stated that the recent 150 basis point increase in the Monetary Policy Rate (MPR) by the Central Bank of Nigeria (CBN) will aggravate further the already high cost of doing business in the country.

Ajayi-Kadir stated in a press conference on Thursday in Lagos that further adjustment and increase in borrowing costs would increase production expenses, limit accessibility to funds and reduce investment and competitiveness in the manufacturing sector.

He also noted that recent decisions by the Monetary Policy Committee (MPC) would further exacerbate the sector’s challenges.

According to the MAN CEO, the MPC appears to prioritize the financial sector over the real sector, instead of seeking a balanced approach.

He indicated that this monetary stance will limit investment and expansion, hampering manufacturers’ ability to invest in innovative technologies, expand production capacities or explore new markets. The combination of higher borrowing costs and lower liquidity will further restrict manufacturers’ capabilities in these areas.

The news continues after this announcement.






The news continues after this announcement.




He said: “As a result, this could lead to delays or cancellations of planned initiatives, ultimately limiting the growth potential of the sector and its overall contribution to economic growth and development.

“The MPC decision will further aggravate the already high cost of doing business and consequently decrease the competitiveness of Nigerian products in the global market.

“The high lending rate above 30% will increase the cost of borrowing and make Nigerian products less competitive with products from other nations.”

Constant increase in MPR has not yielded positive results

Ajayi-Kadir acknowledged the MPC’s efforts in addressing the country’s economic challenges such as inflation and exchange rate fluctuations. However, he urged the committee to consider the impact on the real sector and its wider effects on the nation.

He emphasized that collaboration with tax authorities is essential to reinforce the sector’s traditional role as a significant driver of employment, productivity, foreign exchange earnings and overall economic progress.

Ajayi-Kadir also noted that increasing the MPR for almost two years has not yielded positive results. He, therefore, urged the CBN to explore alternative measures to address the underlying causes of inflation, focusing primarily on cost drivers.

Background

On Wednesday, the MPC announced the decision to further increase the benchmark interest rate by 150 basis points, from 24.75% to 26.25%. The decision follows the tightening of monetary policy by the main bank since the beginning of the year in a bid to control inflation.

  • The CBN has defended the continued huge increase in the MPR during the last three MPC meetings as part of measures to stabilize the exchange rate and moderate inflation, which currently stands at 33.69% as of April 2024.

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