Nigerian manufacturers under the auspicious of the Manufacturers Association of Nigeria (MAN), have warned that increase in Monetary Policy Rate (MPR) from 18 per cent to 18.5 per cent will worsen the uncompetitiveness of the manufacturing sector.
The director-general of MAN, Segun Ajayi-Kadiri, while reacting on the issue, added that, “the association has been clamoring for single-digit lending rates to allow manufacturers access needed funds to boost the performance of the sector. This increase, like the previous ones, is evidence that the CBN is either unperturbed about the plight of the productive sector or is unable to fathom out a more creative policy mix that would reflate the sector.
“We are persuaded that monetary authority is oblivious of the fact that the failure of its tightening policy to address the inflationary pressure is because the hike in inflation is largely caused by a combination of familiar challenges, including low output which is attributed to instability of macroeconomic variables, inconsistent and lackluster fiscal policy regime, incoherent industrial policies, challenging and expensive operating environment, exploitative regulation, external shocks and poor exchange rate management.”
MAN DG explained that, there is a need to address the identified root causes of inflation and refrain from intensifying policy choices that hamper the performance of the real sectors of the economy.
He also said it is necessary for government to think outside the conventional monetary policy framework and take pragmatic steps to quell the inflationary pressure and reposition the economy.
As the cost of lending from the Commercial Banks is expected to increase with the increase in MPR, he recommended that priority attention be given to improving the size of the available special funding windows and making them accessible to the industries at liberal conditionality.
The Nigerian economy, he said, remains fragile and bedeviled with numerous challenges that inhibit growth, while calling on the monetary authority to pay closer attention to rethink the policy mix, bearing in mind the parlous state of the economy, especially, the effect of a high MPR on the manufacturing sector and the economy.
According to Ajayi-Kadiri, the increase will compound the imminent recession in the manufacturing sector and negatively impact its operations in so many ways, including: increase in the cost of borrowing that will further discourage investments in the sector; high cost of production which will lead to higher commodity prices and inventory of unsold manufactured products; decline in capacity utilization owing to high interest rate and reduction in sales; among others.
