Unimpressed with the 200 basis points increase in Monetary Policy Rate by the Central Bank of Nigeria, the Lagos Chamber of Commerce and Industry says the increase is ill-timed.
Muda Yusuf, the Director-General of the chamber, told the News Agency of Nigeria on Wednesday that the hike would further exacerbate the challenges facing businesses in the country.
Yusuf said: “This is not the appropriate time to increase rate because businesses have suffered too many shocks in the last couple of months.
“Shocks from foreign exchange rate depreciation, backlog of remittances that were supposed to be made at N200 but are now being settled at about N285, a lot of companies took a big hit from that.
“Costs went up by almost 40 per cent, high energy cost, cost of diesel also went up to about N210 per litre, power supply situation has dropped, no gas and cost of transportation has increased.
“This is not the time to further increase rate.
“It is not good news for the business community.
“The economy is on the threshold of recession and when you find an economy in this state, all hands must be on deck to see how we can support it to recover.”
NAN reports that the CBN after its MPC meeting on July 26 raised its benchmark interest rate to 14 per cent from 12 per cent to stabilise the Naira and also control inflation.
MPR is the rate at which the CBN lends to commercial banks and it has been a key instrument in stabilising prices.
Yusuf, however, disagreed with the CBN’s perspective that they needed to adjust rate to a level that interest rate would be positive in order to attract some inflows.
He said: “My view is that if we create the right environment, especially liquidity in the foreign exchange market, and deal with infrastructure issues, it will open up the space for investors to come in.
“The returns from investment in the economy will be sufficient to attract more investors to bring in their funds into the economy.”
The director-general stressed that the concern about inflation was not sufficient enough for the CBN to increase rate, especially with the challenges that the economy was facing.
Yusuf said: “We have issues with consumers’ low purchasing power, unemployment rate, low productivity and many businesses are closing down because the operators cannot sustain running cost.”
According to him, inflation is cost driven and not a monetary phenomenon and should be tackled from the supply side.
He said: “The CBN even acknowledged during its MPC meeting that inflation is driven by cost.
“Cost of energy, exchange rate, import restrictions are some of the factors responsible for inflation.
“They are the factors that we should try to tackle in order to stimulate the economy, generate jobs, increase productivity so that we can drive inflation down.”
NAN.
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