The Manufacturers Association of Nigeria has warned that the recent increase in base lending rate by the Monetary Policy Committee of the Central Bank of Nigeria will trigger higher prices of products, amongst other negative consequences.
MAN stated this in a statement titled, “The preliminary
position of MAN on the July 19, 2022 decision of the Monetary Policy Committee
of the central bank of Nigeria.”
The group said this was another level of increase in
interest rates on loanable funds, which would upscale the intensity of the
crowding-out effect on the private sector businesses as firms had lesser access
to funds in the credit market.
According to the statement, the rate hike, amongst other
biting consequences would “intensify demand crunch emanating from the heavily
eroded disposable income of Nigerians, constraining access of households and
individuals to cheap funds.”
It said the situation would also “lead to rising cost of
manufacturing inputs, which will naturally translate to higher prices of goods,
low sales and enormous volume of inventory of unsold products.”
The statement further read, “MAN is therefore concerned
about the ripple effects of this decision and its implications for the
manufacturing sector that is visibly struggling to survive the numerous
strangulating fiscal and monetary policy measures and reforms
“Consequently, manufacturers are hopeful that the stringent
conditionalities for accessing available development funding windows with the
CBN will be relaxed to improve the flow of long-term loans to the manufacturing
sector at single digit interest rate.”
Speaking in an exclusive interview with The PUNCH, an
economist at Onabisi Onabanjo University, Professor Sheriffdeen, said higher
prices were inevitable in the light of the recent rate hike by the CBN.
He added that the apex bank’s rationale of increasing the
lending rate due to rising inflation was economically flawed.
He said, “The
increase in rate will lead to increase in prices because it means that the cost
of borrowing money for business has increased. Even if they’re not borrowing,
that signal indicates that when they want to borrow, they’re going to pay more.
So, definitely, the price will rise and that is added to the fact that there’s
already an increase in the price of energy, that is electricity as well as
fuel.
“The increase arising from depreciation of naira because we
import a lot of things also means higher prices. The third one is the fact that
the Federal Government has been borrowing from the Central Bank and that is
inflationary on its own. So, given all those three, they’ve made the price rise
and there is a general increase in price in the world because of the war in
Ukraine and Russia.
So, all those have made prices go up. So, the Central Bank
ought to look at that and say, ‘we don’t want to increase the rates’ but they
say that they want to curb inflation as if this inflation were caused by more
money in the economy. It’s not. It is caused by some other things, so,
definitely, the increase in rates will further increase the level of prices.”
0 comments:
Post a Comment