Ahead of the third quarter, the Lagos Chamber of Commerce and Industry (LCCI) has stressed the need for the Central Bank of Nigeria (CBN) to expand its targeted intervention schemes to support the productive sectors of the economy to reduce the cost of production.
Reacting to the recent hike in the Monetary Policy Rate (MPR) by the Monetary Policy Committee of CBN from 11.5per cent to 13per cent, the Director General of the Chamber, Dr Chinyere Almona stated that interest rate hikes will not on their own curb inflationary pressures.
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She noted that the increase was well expected by the chamber, following recent fundamentals in the economy; adding that, it is well understood that the hike was meant to control the rising inflation rate and feared to assume a galloping trend soon.
“CBN has always maintained that Nigeria’s high inflation rate was due to non-monetary factors outside its purview, but we have consistently pointed at factors responsible for the rising inflation including an epileptic supply of Premium Motor Spirit (PMS), high cost of Automotive Gas Oil (AGO/Diesel), electricity tariff hikes, insecurity, and the illiquidity crisis in the foreign exchange market.
“These factors have continued to put pressure on the cost of production translating to higher prices or cost-push inflation. These headwinds must be tackled head-on for the inflationary pressure to be tamed sustainably,” she said.
According to Almona, the hike in the interest rates will normally mean less credit to the private sector and can translate to reduced investment and constrained production in the economy, in the short term.
She added that the action also has implications for economic growth, job creation, and revenue generation for the government. “When the MPR was 11.5per cent, some credit lenders charged as high as 25per cent maximum rate to small companies. With the benchmark interest rate now at 13per cent, we may likely have rates climb beyond 30per cent for SMEs.”
The chamber restated its recommendation that the supply-side challenges like insecurity, forex scarcity and uncertainties from the inconsistent policy environment must be tackled to curb the rising inflation.