Despite the latest hike in the interest rate by the Central Bank of Nigeria (CBN), the Lagos Chamber of Commerce and Industry (LCCI) said it anticipates that borrowing costs will continue to rise.
LCCI made this assertion in a press release signed by its Director General, Dr Chinyere Almona in reaction to the latest CBN Monetary Policy Committee move which raised interest to 18.5 per cent last week.
Almona reasoned that given the drop in the first quarter GDP, high-interest rates may increase the risk to the growth of the economy, specifying that the Chamber worries about how manufacturers and other businesses would endure the recently approved additional and increased excise taxes on a variety of commodities as well as the high borrowing rates.
She noted while the CBN has the overarching mandate of ensuring price stability, LCCI suggested that it should do this in a manner that supports growth, especially in the face of high unemployment and rising incidence of poverty.
It declared that monetary policy instruments alone appear quite insufficient to guarantee the desired results of low, stable and predictable prices in the face of shocks to food and energy prices on the global scene and pass-through from exchange rate devaluation to domestic prices.
“Inflation diminishes purchasing power leading to inventory stockpiles, undermines growth, and creates economic uncertainties. Taming it, however, should not be at the expense of the growth and survival of the most vulnerable sectors” Almona warned.
LCCI maintained that the consistent hawkish stance by the monetary authority shows that in the last 12 months, the benchmark rate has increased from 11.5 per cent to 18.5 per cent.
Still, it said the latest figure of 22.22 per cent showed that inflation has remained highly resistant, adding that inflation has grown from 16.82 per cent in April 2022, up by 5.4 percentage points despite a 7.0 percentage point increase in the monetary policy rate, underscoring the widely acclaimed futility of rate hikes in curbing cost-pushed inflation.
Recall that the Monetary Policy Committee (MPC) of the CBN, in its May 2023 Meeting, again hiked the benchmark interest rate by 50 basis points to 18.5 in per cent from 18.0 per cent.
It, however, retained the asymmetric corridor at +100 and -700 basis points around the policy rate. Also, Cash Reserve Ratio (CRR) and Liquidity Ratio (LR) remain at 32.5 per cent and 30 per cent, accordingly.
This recent hike, LCCI hike is the seventh consecutive rate hike since April 2022 and the highest level since November 2002.