The Lagos Chamber of Commerce and Industry LCCI has reacted to the recent hike in interest rate by the Central Bank of Nigeria, (CBN) suggesting that the policy should be implemented in a manner that compromises growth, particularly in the face of high unemployment rate.
The Chamber in a press release signed by its Director General, Dr Chinyere Almona noted while CBN has the overarching mandate of ensuring price stability, the instrumentality of the monetary policy alone “appears quite insufficient to guarantee the desired results of low, stable, and predictable prices”.
“We believe that structural rigidities around infrastructure and agriculture should be looked into and tackled to rein in inflation.
“Inflation chips away at purchasing power leads to inventory stockpiles, undermines growth, and creates a lot of economic uncertainties.
“Taming it, however, should not be done at the expense of growth and the most vulnerable sectors” Almona advised.
Recall that the CBN’s Monetary Policy Committee (MPC) in its March 2023 meeting hiked the benchmark interest rate by 50 basis points to 18.0 per cent from 17.5 per cent.
It however retained the asymmetric corridor at +100 and -700 basis points around the policy rate. Cash Reserve Ratio (CRR) and Liquidity Ratio (LR) are held steady at 32.5% and 30%, accordingly. This is the sixth consecutive rate hike since April 2022.
LCCI recalled this “consistent hawkish stance by the monetary authority is in response to the high inflationary pressure. At 21.91%, the inflationary rate is more than twice the targeted range (6 – 9%) set by the CBN. Since April 2022, inflation has increased from 16.82% to 21.91% in February, 2023. Despite the 6.5% points increase in the key rate over the same period, inflation does not seem to be letting off”.
It said the last CPI figures released by the NBS showed inflation slightly increased to 21.91 per cent in February from 21.82 per cent in January 2023. The price rises that continue to hit the system appear non-transitory.
“We, like the other market watchers, expected the CBN to hold off an increase or at best moderate, the key rate given the weak relationship between it and inflation especially after manufacturers and other businesses are groaning under high borrowing costs and the cash crisis” LCCI DG lamented.