Economic growth impossible with current CBN policies, MAN laments
By Jeph Ajobaju, Chief Copy Editor
Continuous hikes in interest rates by the Central Bank of Nigeria (CBN) underscores its priority in favour of the financial sector instead of the real sector, the Manufacturers Association of Nigeria (MAN) has reiterated in its latest take on why the economy is not productive enough.
CBN Monetary Policy Committee (MPC) last week raised Monetary Policy Rate (MPR) by 150 basis points to 26.25 per cent from 24.75 per cent, and left Liquidity Ratio (LR) unchanged at 30.0 per cent.
It also maintain the Cash Reserve Ratio (CRR) of Deposit Money Banks (DMBs) at 45.0 per cent.
MAN Director General Segun Ajayi-Kadir countered in a statement that the MPC decisions will further exacerbate the challenges of the manufacturing sector, as steeper credit interventions and loan costs would raise production costs, limit fund accessibility, and erode investment and competitiveness.
“The persistent macroeconomic instability in Nigeria, resulting from sustained monetary policy decisions over the past two years has negatively impacted the manufacturing sector,” Ajayi-Kadir stressed.
“This instability, compounded by various constraints affecting sectoral performance, continues to disrupt production plans, undermine investments, and cast uncertainty over prospects.
“Furthermore, recent decisions by the MPC exacerbate these challenges by further tightening credit interventions, increasing loan costs, raising production cost, limiting fund accessibility, and eroding investment and competitiveness within the manufacturing sector.
“It is evident that the MPC leans towards prioritising the financial sector over the real sector, rather than striving for a balanced approach between the two.
“These effects are intensified by the current monetary stance, contributing to constraints on investment and expansion and further decline in manufacturing competitiveness.
“The decision by the MPC will further compound the already high cost of doing business, consequently diminishing the competitiveness of Nigerian products in the global market.
“The high lending rate exceeding 30 per cent will increase the cost of borrowing and make Nigeria’s goods less competitive to products from other nations.”
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Impact on real sector and multiplier effects on overall economy
Ajayi-Kadir acknowledged the efforts of CBN in confronting economic challenges, notably fluctuations in inflation and exchange rates, but urged the apex bank to consider the impact on the real sector and the multiplier effects on the nation.
He stressed that collaboration with fiscal authorities is essential to reinforce the sector’s traditional role in driving employment, raising productivity, steadying foreign exchange earnings, and sustaining economic progress.
According to him, raising MPR has persisted for nearly two years without positive results, and the CBN needs to explore alternative measures to address the underlying causes of inflation, primarily cost-push factors.
“MAN earnestly urges the MPC to carefully evaluate the effects of these monetary policy actions on both the manufacturing sector and the broader economy.
“Achieving a delicate equilibrium between addressing macroeconomic challenges and fostering the growth and resilience of the manufacturing industry is crucial.
“Therefore, MAN advocates for robust collaboration between monetary and fiscal authorities and implementation of targeted interventions aimed at alleviating the financial burden on manufacturers.”
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