Manufacturers want CBN to sweeten pill of rate hikes

Manufacturers are hopeful that the Central Bank of Nigeria will relax what they described as “stringent conditionalities” for accessing available development funding windows as a way of cushioning the ripple effects of interest rate hikes.

The Manufacturers Association of Nigeria said in a statement that the increase in the monetary policy rate would lead to a further squeeze on businesses’ profits and heighten the mortality rate of small businesses.

The country’s annual inflation surged to 18.6 percent in June from 17.7 percent in May, forcing the Central Bank of Nigeria to raise its key interest rate last week for the second time this year to 14 percent from 13 percent in May. The monetary policy rate was initially increased in May from 11.5 percent.

The Director-General of MAN, Segun Ajayi-Kadir, said the rate hike would exacerbate the intensity of idle capital assets, worsen the already declining profit margin of private businesses and heighten the mortality rate of small businesses.

He said, “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 a single-digit interest rate.”

The manufacturers expect the Monetary Policy Committee to ensure that future adjustments of MPR take into consideration the trend of core inflation rather than basing decisions on the headline and food inflation.

“This will no doubt shield the sector from the backlashes from the 14% MPR, ramp up production and guarantee sustained growth in the overall best interest of the economy,” Ajayi-Kadir added.